scholarly journals Validating Virtual Safety Stock Effectiveness through Simulation

10.5772/56859 ◽  
2013 ◽  
Vol 5 ◽  
pp. 41 ◽  
Author(s):  
Maria Elena Nenni ◽  
Massimiliano M. Schiraldi
Keyword(s):  
Service Level ◽  
Inventory System ◽  
Time Interval ◽  
Common Condition ◽  
Simple Method ◽  
Safety Stock ◽  
Safety Stocks ◽  
Base Stock Policy ◽  
Stock Policy ◽  
Business To Business

As a means of avoiding stock-outs, safety stocks play an important role in achieving customer satisfaction and retention. However, traditional safety stock theory is based on the assumption of the immediate delivery of the ordered products, which is not a common condition in business-to-business contexts. Virtual safety stock theory was conceived to raise the service level by exploiting the potential time interval in the order-to-delivery process. Nevertheless, its mathematical complexity prevented this technique from being widely adopted in the industrial world. In this paper, we present a simple method to test virtual safety stock effectiveness through simulation in an inventory system using a base stock policy with periodic reviews and backorders. This approach can be useful for researchers as well as practitioners who want to model the behaviour of an inventory system under uncertain conditions and verify the opportunity for setting up a virtual safety stock on top of, or instead of, the traditional physical safety stock.

Service Level Relationships in Multi-stage Systems under the Base Stock Policy

OPSEARCH ◽  
2002 ◽  
Vol 39 (3-4) ◽  
pp. 230-242
Author(s):  
Subrata Mitra ◽  
Ashis K. Chatterjee
Keyword(s):  
Service Level ◽  
Base Stock ◽  
Base Stock Policy ◽  
Multi Stage ◽  
Stock Policy

ERROR ANALYSIS OF AN APPROXIMATE OPTIMAL POLICY FOR AN INVENTORY SYSTEM WITH STOCHASTIC AND CONTINUOUS DEMANDS

2012 ◽  
Vol 29 (06) ◽  
pp. 1250039
Author(s):  
WEI GENG ◽  
JIANYONG LIU ◽  
XIAOBO ZHAO
Keyword(s):  
Optimal Policy ◽  
Computational Grid ◽  
Inventory System ◽  
Periodic Review ◽  
Setup Costs ◽  
Base Stock Policy ◽  
Periodic Review Inventory System ◽  
Stock Policy ◽  
Computational Intractability ◽  
Periodic Review Inventory

For a periodic-review inventory system with stochastic and continuous demands and without setup costs, it is known that there exists a base-stock policy to be optimal. For a finite-horizon system with non-stationary parameters, it is essential to find approximate optimal policies because of the computational intractability of finding the optimal policy. This paper provides an approach, by which an analytical bound of the error between the costs of the approximate optimal policy and the optimal policy is given. It is shown that the approximate optimal policy converges to the optimal policy as the size of the computational grid decreases. Numerical results are presented to illustrate the methodology.

scholarly journals Optimization and Customer Utilities under Dynamic Lead Time Quotation in an M/M Type Base Stock System

2017 ◽  
Vol 2017 ◽  
pp. 1-10 ◽  
Author(s):  
Koichi Nakade ◽  
Hiroki Niwa
Keyword(s):  
Waiting Time ◽  
Lead Time ◽  
Inventory System ◽  
Base Stock ◽  
Base Stock Policy ◽  
Optimal Policies ◽  
Optimal Dynamic ◽  
System Information ◽  
Lead Time Quotation ◽  
Stock Policy

In a manufacturing and inventory system, information on production and order lead time helps consumers’ decision whether they receive finished products or not by considering their own impatience on waiting time. In Savaşaneril et al. (2010), the optimal dynamic lead time quotation policy in a one-stage production and inventory system with a base stock policy for maximizing the system’s profit and its properties are discussed. In this system, each arriving customer decides whether he/she enters the system based on the quoted lead time informed by the system. On the other hand, the customer’s utility may be small under the optimal quoted lead time policy because the actual lead time may be longer than the quoted lead time. We use a utility function with respect to benefit of receiving products and waiting time and propose several kinds of heuristic lead time quotation policies. These are compared with optimal policies with respect to both profits and customer’s utilities. Through numerical examples some kinds of heuristic policies have better expected utilities of customers than the optimal quoted lead time policy maximizing system’s profits.

scholarly journals Dynamic Pricing and Production Control of an Inventory System with Remanufacturing

2015 ◽  
Vol 2015 ◽  
pp. 1-8 ◽  
Author(s):  
Chunyan Gao ◽  
Yao Wang ◽  
Liang Xu ◽  
Yi Liao
Keyword(s):  
Dynamic Pricing ◽  
Production Control ◽  
Inventory System ◽  
Base Stock ◽  
Inventory Level ◽  
Optimal Pricing ◽  
Customer Demand ◽  
Threshold Policy ◽  
Base Stock Policy ◽  
Stock Policy

We consider optimal pricing and manufacturing control of a continuous-review inventory system with remanufacturing. Customer demand and product return follow independent Poisson processes. Customer demand is filled by serviceable product, which can be either manufactured or remanufactured from the returned product. The lead times for both manufacturing and remanufacturing are exponentially distributed. The objective is to maximize the expected total discounted profit over an infinite planning horizon. We characterize the structural properties of the optimal policy through the optimality equation. Specifically, the optimal manufacturing policy is a base-stock policy with the base-stock level nonincreasing in the return inventory level. The optimal pricing policy is also a threshold policy, where the threshold level is nonincreasing in the return inventory level.

scholarly journals Evaluating The Performance of Inventory Management The Production Division of PT. Tiga Serangkai Surakarta as a Case Study

2016 ◽  
Vol 1 (1) ◽  
pp. 93
Author(s):  
Sri Maryati
Keyword(s):  
Inventory Management ◽  
System Performance ◽  
Service Level ◽  
Inventory System ◽  
Order Quantity ◽  
Safety Stock ◽  
Production Employee ◽  
The Cost

This research aims to understand the process of production and to analyze the performance of inventory system on production division of PT. Tiga Serangkai. The data has been gathered from direct observation of the process production and warehouse and the interview with the production employee, the employee of warehouse division, supervisor of purchasing and finance manager. This research demonstrates that inventory system performance of PT. Tiga Serangkai Surakarta can be optimized through the determination of inventory policy, applying a model minimum and maximum inventory that considers the safety stock in accordance with service level plan, implementing model Reorder Point (ROP) which can be used as guidelines in charging supply back, and applying the model economic ordering quantity. In doing so, they can save the cost of inventory. Keywords: inventory management, economic order quantity (EOQ), PT. Tiga Serangkai 

scholarly journals A Two-Echelon Inventory System with a Minimum Order Quantity Requirement

2019 ◽  
Vol 11 (18) ◽  
pp. 5059
Author(s):  
Huaxiao Shen ◽  
Tian Tian ◽  
Han Zhu
Keyword(s):  
Inventory System ◽  
Base Stock ◽  
Order Quantity ◽  
Minimum Order ◽  
System Cost ◽  
Base Stock Policy ◽  
Long Run ◽  
Minimum Order Quantity ◽  
Average System ◽  
Stock Policy

In this paper, we study a two-echelon inventory system with one warehouse and multiple retailers, under the setting of periodic review and infinite horizon. In each period, retailers replenish their stocks from the warehouse, and the warehouse in turn replenishes from an external supplier. Particularly, as stipulated by the supplier, there is a minimum order quantity (MOQ) requirement for the warehouse. That is, the warehouse must order either none or at least as much as the MOQ. To investigate this system analytically, we assume retailers adopt the base-stock policy, and we design for the warehouse a new heuristic ordering policy, called refined base-stock policy, which conforms to the MOQ requirement. Moreover, in the case of shortages, we assume the warehouse adopts a virtual allocation policy, and therefore the orders for individual units are filled in the same order as the original demands at the retailers. To evaluate the long-run average system cost exactly, we present a position-based cost-accounting scheme, in which the cost associated with each unit is assigned to its first position at the warehouse. We also derive lower and upper bounds of the inventory parameters, facilitating the search for the optimal policy that minimizes the long-run average system cost.

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