A Simple Procedure for Determining Order Quantities under a Fill Rate Constraint and Normally Distributed Lead-Time Demand
(2006) In European Journal of Operational Research 174(1). p.480-491- Abstract
- One of the most common practical inventory control problems is considered. A single-echelon inventory system is controlled by a continuous review (R,Q) policy. The lead-time demand is normally distributed. We wish to minimize holding and ordering costs under a fill rate constraint. Although, it is not especially complicated to derive the optimal solution, it is much more common in practice to use a simple approximate two-step procedure where the order quantity is determined from a deterministic model in the first step. We provide an alternative, equally simple technique, which is based on the observation that the considered problem for each considered fill rate has a single parameter only. The optimal solution for a grid of parameter... (More)
- One of the most common practical inventory control problems is considered. A single-echelon inventory system is controlled by a continuous review (R,Q) policy. The lead-time demand is normally distributed. We wish to minimize holding and ordering costs under a fill rate constraint. Although, it is not especially complicated to derive the optimal solution, it is much more common in practice to use a simple approximate two-step procedure where the order quantity is determined from a deterministic model in the first step. We provide an alternative, equally simple technique, which is based on the observation that the considered problem for each considered fill rate has a single parameter only. The optimal solution for a grid of parameter values is stored in a file. When solving the problem for an item we use interpolation, or for parameter values outside the grid special approximations. The approximation errors turn out to be negligible. As an alternative to the interpolation we also provide polynomial approximations. (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/632934
- author
- Axsäter, Sven LU
- organization
- publishing date
- 2006
- type
- Contribution to journal
- publication status
- published
- subject
- keywords
- Studies, Stochastic models, Approximations, Parameter optimization, Inventory control, Operations research
- in
- European Journal of Operational Research
- volume
- 174
- issue
- 1
- pages
- 480 - 491
- publisher
- Elsevier
- external identifiers
-
- wos:000239252600033
- scopus:33845276299
- ISSN
- 0377-2217
- DOI
- 10.1016/j.ejor.2005.01.037
- language
- English
- LU publication?
- yes
- id
- 217d6f51-9fcf-40eb-ba1b-8e12968a9e6b (old id 632934)
- date added to LUP
- 2016-04-04 07:13:07
- date last changed
- 2023-01-05 06:47:25
@article{217d6f51-9fcf-40eb-ba1b-8e12968a9e6b,
abstract = {{One of the most common practical inventory control problems is considered. A single-echelon inventory system is controlled by a continuous review (R,Q) policy. The lead-time demand is normally distributed. We wish to minimize holding and ordering costs under a fill rate constraint. Although, it is not especially complicated to derive the optimal solution, it is much more common in practice to use a simple approximate two-step procedure where the order quantity is determined from a deterministic model in the first step. We provide an alternative, equally simple technique, which is based on the observation that the considered problem for each considered fill rate has a single parameter only. The optimal solution for a grid of parameter values is stored in a file. When solving the problem for an item we use interpolation, or for parameter values outside the grid special approximations. The approximation errors turn out to be negligible. As an alternative to the interpolation we also provide polynomial approximations.}},
author = {{Axsäter, Sven}},
issn = {{0377-2217}},
keywords = {{Studies; Stochastic models; Approximations; Parameter optimization; Inventory control; Operations research}},
language = {{eng}},
number = {{1}},
pages = {{480--491}},
publisher = {{Elsevier}},
series = {{European Journal of Operational Research}},
title = {{A Simple Procedure for Determining Order Quantities under a Fill Rate Constraint and Normally Distributed Lead-Time Demand}},
url = {{http://dx.doi.org/10.1016/j.ejor.2005.01.037}},
doi = {{10.1016/j.ejor.2005.01.037}},
volume = {{174}},
year = {{2006}},
}