Replenishment policies

Now, suppose the replenishment policy is a dynamic (S s) rule. Specifically, when A, > 0, we want to bring the inventory position to (> Hence, an additional amount, S, i — is needed, and the order quantity is ... 

On the other hand, given any replenishment policy with a prespecified Q, (as a function of A, > 0), we can implement this pohcy by setting [cf. (30)] ... 

Deshpande, V, Iyer, A.V, and Cho, R. Efficient Supply Chain Management at U.S. Coast Guard Using Part-Age Dependent Supply Replenishment Policies. Operations Research, 54(6) 1028—1040, November—December 2006. 

The wholesaler uses a quantity discount strategy in order to improve her/his profit. The wholesaler proposes, for the retailer, an order quantity per lot along with the corresponding discounted wholesale price, which induces the retailer to alter her/his replenishment policy. 

Direct-shipment customers Replenishment policy, including... 

T. Boyaci and G. Gallego. Coordinating pricing and inventory replenishment policies for one wholesaler and one or more geographically dispersed retailers. Interntional Journal of Production Economics, 77 95-111,2002. 

An adaptive replenishment policy for the linear state-space model... 

Since this is a relatively fast-moving item at this store, the current replenishment policy calls for daily (on average) replenishments (i.e., an order quantity of 5 units). 

Mini-case study Milo s Home Improvement was recently named as an authorized distributor of lawn tractors by the Dear John Company (DJC— whose advertising proclaims, "You ll love our tractors so much you won t care if she leaves you for someone who s not so attached to lawn care.") Milo s retail network covers the Southeastern United States. You are the newly hired logistics analyst for Milo s, and you ve been asked to evaluate the company s current replenishment policies for optional accessories to support lawn tractors. 

Given the current replenishment policy information, what is the inventory cycle length, in days, for each of the four items (See Chapter 3, if necessary, for more information on computing the inventory cycle length.)... 

Mak, K.L., Lai, K.K., Ng, W.C. and Yiu, K.F.C. 2005. Analysis of optimal opportunistic replenishment policies for inventory systems by using a (s,S) model with a maximum issue quantity restriction. European Journal of Operational Research, 166, 385-405. 

If consumers only purchased their requirements in line with their use, then it would be relatively easy to reorganise the end-to-end supply chain from shelf to national warehouse using lean principles (see Chapter 6). A simple demand-pull system replenishing tomorrow that which has been sold today, direct to shelf, would streamline store operations and reduce inventories significantly. Retailers like Wal-Mart in the United States and Tesco in Britain have pursued an everyday low price policy in an attempt to maximise this steady state replenishment policy. However, in Europe, most retailers have found that customers enjoy promotions and that promotions boost sales. In any case, events like Christmas and back to school create huge surges in demand. 

If an integer replenishment policy is synchronized across the two stages, the distributor can cross-dock part of its supply on to the next stage. All shipments to retailers ordering no more frequently than the distributor (every two or four weeks) are cross-docked, as shown in Figure 11-7. For retailers ordering more frequently (every week) than the distributor, half the orders are cross-docked, with the other half shipped from inventory, as shown in Fignre 11-7. 

Integer replenishment policies for the supply chain shown in Figure 11-8 can be sununa-... 

Integer replenishment policies can be synchronized in multiechelon supply chains to keep cycle inventory and order costs low. Under such policies, the reorder interval at any stage is an integer multiple of a base reorder interval. Synchronized integer replenishment policies facilitate a high level of cross-docking... 

Next, we desalbe two replenishment policies that are often used in practice. Replenishment Policies... 

A replenishment policy consists of decisions regarding when to reorder and how much to reorder. These decisions determine the cycle and safety inventories along with the fill rate fr and the cycle service level CSL. Replenishment policies may take any of several forms. We restrict attention to two types ... 

EVALUATING SAFETY INVENTORY GIVEN A REPLENISHMENT POLICY In the case of B M, safety inventory corresponds to the average number of phones on hand when a replenishment order arrives. Given the lead time of L weeks and a mean weekly danand of D, using Equation 12.2, we have... 

Under this replenishment policy, we have Average demand per week, D = 2,500 Standard deviation of weekly demand, = 500 Average lead time for replenishmenL L = 2 weeks Reorder point, ROP = 6,000 Average lot size, Q = 10,000... 

Evaluating Cycle Service Level Given a Replenishment Policy... 

Weekly demand for Legos at a Walmart store is normally distributed, with a mean of 2,5(X) boxes and a standard deviation of 500. The replenishment lead time is two weeks. Assuming a continuous-review replenishment policy, evaluate the safety inventory that the store should carry to achieve a CSL of 90 percent. 

We now show how fiU rates can be evaluated given a replenishment policy (and thus the corresponding safety inventory). We then show how to determine the required safety inventory given a desired fill rate. 

EVALUATING FILL RATE GIVEN A REPLENISHMENT POLICY RecaU that fiU rate measures the proportion of customer demand that is satisfied from available inventory. EiU rate is generally a more relevant measure than cycle service level because it allows the retailer to estimate the fraction of demand that is turned into sales. The two measures are closely related, as raising the cycle service level also raises the fill rate for a firm. Our discussion focuses on evaluating fill rate for a continuous review policy under which Q units are ordered when the quantity on hand drops to the ROP. 

In other words, 99.75 percent of the demand is filled from inventory in stock. This is much higher than the CSL of 92 percent that resulted in Example 12-2 for the same replenishment policy. 

In this section, we describe the evaluation of safety inventories for both continuous and periodic-review replenishment policies. We highlight the fact that periodic review policies require more safety inventory than continuous review policies for the same level of product availability. To simplify the discussion, we focus on the CSL as the measure of product availability. The managerial implications are the same if we use fiU rate the analysis, however, is more cumbersome. 

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