Determining order-up-to levels under periodic review for compound binomial (intermittent) demand

Teunter, R; Syntetos, A; Babai, M.Z.

Abstract

We propose a new method for determining order-up-to levels for intermittent demand items in a periodic review system. Contrary to existing methods, we exploit the intermittent character of demand by modelling lead time demand as a compound binomial process. In an extensive numerical study using Royal Air Force (RAF) data, we show that the proposed method is much better than existing methods at approximating target service levels and also improves inventory-service efficiency. Furthermore, the proposed method can be applied for both cost and service oriented systems, and is easy to implement.

Citation

Teunter, R., Syntetos, A., & Babai, M. (2010). Determining order-up-to levels under periodic review for compound binomial (intermittent) demand. European Journal of Operational Research, 203(3), 619-624. https://doi.org/10.1016/j.ejor.2009.09.013

• Journal Article Type: Article
• Publication Date: Jan 1, 2010
• Deposit Date: Oct 14, 2011
• Journal: European Journal of Operational Research
• Print ISSN: 0377-2217
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 203
• Issue: 3
• Pages: 619-624
• DOI: https://doi.org/10.1016/j.ejor.2009.09.013
• Keywords: Compound binomial (intermittent) demand, periodic stock control, service levels, empirical investigation
• Publisher URL: http://dx.doi.org/ 10.1016/j.ejor.2009.09.013
• Additional Information: Funders : Engineering and Physical Sciences Research Council (EPSRC); Projects : EPSRC: EP/D062942/1;EPSRC: EP/G006075/1