100% service level. Now we will consider probabilistic demand models. We will have occasional shortages and service level may be less than 100%No.Model type5When to reorderfixed amount Q: Re-order point model (Q system, continuous review system)6How much to orderat a fixed time:Fixed order interval model (P system, periodic review system)7Single period model (Newsvendor)
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In the Q system, when inventory positionfalls below a specified value ( ROP), what should be done? •A.) Calculate days of stock in inventory•B.) Back order•C.) Dip into safety stock•D.) Place an order
5. Q system: Continuous Review System.•Inventory is reviewed continuously (from practical point of view, we may do this every morning).•When inventory positionfalls below a specified value (called reorder point: ROP), we place an order.We will assume that•We will order a fixed quantity (Q).•Lead time is fixed.•Shortages are made up by backordering.Order Q units when IPROP•Demand may vary from day to day and shortages can occur occasionally while we wait for an order to arrive.•We will start with a manual example.38