Inventory management: (s,q) inventory policy with a constraint on the customer order waiting time

For a (s,q) inventory policy with periodic (daily) review the reorder point s is determined, that satisfies a prespecified maximum customer order waiting time (delivery window) for a given percentage of customer orders. The constraint could read: 95% of all customer orders should be delivered within a maximum delivery time of two days. It is assumed, that each day a certain number of customer orders arrives, which is described by its mean E{A} and its variance V{A}. The order sizes are assumed to be normal-distributed. The resulting period demand demand is also assumed to be normal-distributed. The replenishment lead time is a discrete random variable with up to 10 classes.

Literature:

- Tempelmeier (2006)