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Inventory management: (s,S) inventory policy with normally distributed period demand

The parameters of a (s,S) inventory policy with periodic (daily) review under normal distributed demand subject to a -service level constraint are computed. In a first step, Schneider's simple approximation is used. In a second step, the procedure proposed by Tijms and Groenevelt (1984) is applied. The difference (S-s) may be entered or computed with the help of the economic order quantity formula.

Symbole:

E{D} expected demand per period
E{L} lead time
E{Y} expected demand during lead time
E{U} expected undershoot
V{Y} variance of the demand during lead time
s reorder point
S reorder level

Assumptions:

  • normal-distributed period demand
  • ß-service level
  • backorder, no lost sales

The optimal values of s and S are directly transferred to the module for the simulation simulation of a (s,S) inventory policy.

Literature:

- Tempelmeier (2006)


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