Student version - Ch5 - part 4

Decision reorder point rop order up to level oul

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Decision Reorder point ( ROP) Order-up-to level ( OUL) Uncertain demand for SS Demand during lead-time (LT) Demand during protection period (OI+LT) Formulas when demand/unit time ~ N[ , ] ROP = LT + Z SL * LT = LT * + Z SL * ( LT)* Avg. LT demand ( LT ) = LT * SS = Z SL * ( LT)* = ROP LT * OUL = PP + Z SL * PP = (OI+LT)* + Z SL { (OI+LT)}* Avg. PP demand ( PP ) = (OI+LT)* SS = Z SL { (OI+LT)}* = OUL (OI+LT) * Q/ Order interval is selected based on approx. EOQ formula or experience. Safety stock is dependent on the service level. 7
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8 6 Periodic Review (P system) Demand / time: N [ , ]. Order Interval = OI Lead time = LT We need the distribution of demand during protection period PP = ( OI + LT ) PP = ( OI + LT )* and PP = ( ( OI+LT )) * Order up to level ( OUL ) = PP + Z SL * PP = ( OI + LT )* + Z SL * { ( OI + LT )} * = avg. demand for ( OI + LT ) + safety stock
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