Periodic-Review, Reorder-Point-Order-up-to Models

3 Periodic-Review, Reorder-Point-Order-up-to Models 

In practice, however, specifying the DLTR distribudon may be a bit tricky. Since the review period T is a specified constant, then if the lead time L is constant, DLTR is simply comprised of the sum of T + L independent and identically distributed (iid) demand random variables. In this case, we have 

Let us now turn our attention to specifying a value of the order-up-to level S. One straightforward way to do this is to utilize the EOQ expression we discussed earlier in the context of continuous-review models. Accordingly, we could compute 

since the inventory position x should, at each review period, be around s, then each order of S st units should be around EOQ. This means that each order quantity should, as does EOQ, reasonably balance the costs of ordering and holding inventory. 

Returning to the J M Distributors scenario we consider in Examples 3.5 through 3.7, let us assume that J M, at the suggestion of its supplier, moves to semi-weekly reviews of inventory. This allows J M to limit its order placements to only Monday and Thursday each week, allowing the supjplier of WaUShaker speaker systems to coordinate its orders with those of other customers located near J M s distribution center in Nashville, TN. Since this can save freight costs for the supplier, they have agreed to reduce J M s unit price by 3%, to c = 97. 

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