7 Periodic Review (Safety Stock) Model Flashcards
What are the three decision models for inventory mgt (one has two subcategories)
- economic order quantity
- safety stocks (continuous and periodic review)
- newsvendor
Why hold inventory?
- balance inventory holding cost and fixed order costs
- satisfy demand during lead time
- protect against uncertainty
Continuous review
Inventory continuously reviewed
- place order when reach reorder point
When is continuous review most appropriate?
When inventory can be continuously reviewed
Periodic review policy
Inventory reviewed at REGULAR intervals
- appropriate quantity ordered after each review
When is periodic review policy most appropriate?
When itβs inconvenient to frequently review inventory
Two cases of periodic review policy (how often you review inventory
- short intervals (daily)
- longer intervals (weekly/monthly)
What do s and S mean in if you have short review intervals
Both are inventory levels
- if inventory falls below s, order enough to raise inventory to S
If you have longer review intervals, you will order enough to raise the inventory position to what level?
Base-stock level
Target level (OUL)
The inventory level we want to maintain
Exposure period
Exposure period = T + L
T
Interval length of reviewing inventory
How do we calculate the OUL (target)
OUL (target) = π (π³ + π») + ππ
How do we calculate the safety stock in the periodic review model
π π = π§π sqrt (πΏ + π)
Difference cycle inventory and pipeline inventory
Cycle inventory: inventory you have atm (in store)
Pipeline inventory: inventory you ordered but havenβt received yet
Main difference continuous review and periodic review policy
In continuous review you always order the same amount (EOQ), when you hit R
In periodic review, you always after same amount of time, and you order the quantity to reach the base stock level again
How to reduce average inventory levels in periodic review model (order up to level OUT)
A) shorter review time
B) contact supplier for shorter lead time
When are safety stocks negative (what csl)
When CSL is below 50%
Difference fixed quantity and fixed period
Fixed quantity: order when reach ROP, quantity ordered constant
Fixed period: review and order at constant time interval, quantity ordered varies (whatever is missing to reach target inventory level)
