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# Periodic Review Systems

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## Luis Jesús Pérez Rivera

on 19 November 2014

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#### Transcript of Periodic Review Systems

M Sc. Luis Jesús Pérez Rivera
MSc.ljperez@gmail.com
Periodic Review Systems
(S,T) model
S: Inventory target level
T: Revision Period Length
In each revision if the positional inventory (Xt) is less than S, an order for Q=S-Xt units is issued
Xt=It+Ot-Bt (Positional = In hand + On transit - backorder)
ASSUMING normality...
in stock probability
out of stock probability
S
is the (1-alpha) percentile of the RLTD, despite the probability distribution type.
a) By convenience (once a month, every Friday, etc.)

or

b) Analizing the model from the EOQ perspective yields the formula*:
* Assuming a deterministic lead-time smaller than the revision period length.
Revision period setting
The same policies apply to both continuous and periodic review systems:

a) In-Stock probability
b) Fillrate

Assuming normality:
Service level policies
Jones, the owner of a a coffee shop, estimates the annual demand for certain kind of coffee bean is normally distributed with a mean of 240 lb and a std. deviation of 32 lb. The lead time is 0.5 months. Jones adopts a periodic review policy (S,T) to control the inventory, with a revision period length of 1 month. He wants to calculate the inventory target with each service level policy @ 95%.
Optional replenishment system (s,S)
Often called min-max system.
The test is done using the on-hand inventory rather than the positional inventory.
Two inventory levels are defined
s
and
S
.
The review interval is
T
.

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