Reminder. The Normal Distribution Standard Deviation=5 Standard Deviation =10 Average 30 0 10 20 30 40 50 60 Normal distribution:正态分布
Reminder: The Normal Distribution 0 10 20 30 40 50 60 Average = 30 Standard Deviation = 5 Standard Deviation = 10 Normal distribution: 正态分布
Understanding Inventory Tasks for managing inventory Forecasting demand Calculating order quantity Determining when and how much to order Continuous review policy Periodic review policy
Understanding Inventory Tasks for managing inventory Forecasting demand Calculating order quantity Determining when and how much to order Continuous review policy Periodic review policy
Continuous Review Policy: Assumptions Daily demand is random,follows a normally distribution Fixed order cost plus a cost proportional to amount ordered Inventory holding cost is charged per item per unit time If an order arrives and there is no inventory on hand,the order is lost The distributor has a required service level This is expressed as the likelihood that the distributor will not stock out during lead time. Intuitively,how will this affect our policy?
Daily demand is random, follows a normally distribution Fixed order cost plus a cost proportional to amount ordered Inventory holding cost is charged per item per unit time If an order arrives and there is no inventory on hand, the order is lost The distributor has a required service level This is expressed as the likelihood that the distributor will not stock out during lead time. Intuitively, how will this affect our policy? Continuous Review Policy: Assumptions
Notation AVG average daily demand STD standard deviation of daily demand LT replenishment lead time in days h holding cost of one unit for one day ■K=fixed cost SL service level (for example,95%).This implies that the probability of stocking out is 100%-SL(for example,5%) Also,the Inventory Position at any time is the actual inventory plus items already ordered,but not yet delivered
Notation AVG = average daily demand STD = standard deviation of daily demand LT = replenishment lead time in days h = holding cost of one unit for one day K = fixed cost SL = service level (for example, 95%). This implies that the probability of stocking out is 100%-SL (for example, 5%) Also, the Inventory Position at any time is the actual inventory plus items already ordered, but not yet delivered
Continuous Review Policy It is known as a (Q,R)policy Inventory is reviewed continuously Whenever inventory level falls to a reorder point,R,we place an order for Q units
Continuous Review Policy It is known as a (Q, R) policy Inventory is reviewed continuously Whenever inventory level falls to a reorder point, R, we place an order for Q units