Stock-outs

Example A commercial item is sold in a retail outlet as a unit product. In the past, sales have averaged 10 units per month with no seasonal variation. The retail outlet must order replacement items 2 months in advance. If the outlet starts the next 2-month period with 25 items on hand, what is the probabihty that it wih stock out before the end of the second month ... 

Lack of access to medicines and inappropriate doses result in serious morbidity and mortality, particularly for childhood infections and chronic diseases, such as hypertension, diabetes, epilepsy and mental disorders. Inappropriate use and over-use of medicines waste resources - often out-of-pocket payments by patients - and result in significant patient harm in terms of poor patient outcomes and adverse drug reactions. Furthermore, over-use of antimicrobials is leading to increased antimicrobial resistance and non-sterile injections to the transmission of hepatitis, HIV/AIDS and other blood-borne diseases. Finally, irrational over-use of medicines can stimulate inappropriate patient demand, and lead to reduced access and attendance rates due to medicine stock-outs and loss of patient confidence in the health system. 

D Plant shutdown Direct fines product stock-out >500... 

Inventory refers to the stock of products held to meet future demand. Pharmacies hold inventory to guard against fluctuations in demand, to take advantage of bulk discounts, and to withstand fluctuations in supply (e.g., late deliveries) (West, 2003). There are four costs associated with having inventory acquisition costs, procurement costs, carrying costs, and stock-out costs (Carroll, 1998 Huffman, 1996 Silbiger, 1999 Tootelian and Gaedeke, 1993 West, 2003). 

No crude Jetty Low stock, out- Safety More reliable... 

Number of stock outs Evaluates the MRO inventory/materials management process capability to have the on-hand quantities needed for stock items that are normally stocked in the maintenance storeroom. Provides an excellent countermeasure to ensure planned inventory reduction goal is not detrimental to storeroom customer service. Does not measure nonstock items that require requisitioning/purchasing as direct purchases or availability of project-related items. Percent inventory accuracy Maintains accurate fiscal accountability of stocked items to ensure total confidence in current inventory levels and dollar value of MRO inventories. Measures the effectiveness of the cycle-counting process and storeroom control. 

The base-stock control model relates to a queueing model as follows. Consider the case of demand in single units mentioned above. (Batch demand will be discussed below in Section 2.3.) Let each unit of demand correspond to a job arrived to the queue. Each unit of demand, on arrival, is supplied by the on-hand inventory or, in the stock-out situation, joins a back-order queue. Regardless, however, a replenishment/production order is triggered. 

Note that in the approximation above, we have ignored the probability of two or more components stocking out at the same time [in the same spirit as in (46) and (48)]. 

The Reliable Hardware Store sells electric pumps. The supplier lead time is one week. Each pump costs Reliable 100. Annual inventory carrying cost is 25% of the investment. If Reliable stocks out, it will fill demand by buying the required pumps elsewhere at an additional cost of 20, that is. Reliable s cost would be 120. Reliable s planned probability of in stock is 91.2%. 

Thus, for the problem faced by Steco, a retailer of titanium rods. Weekly demand for these rods follows a normal distribution with a mean of 100 units and a standard deviation of 5 units per week. These rods cost 5 each and the cost of holding a rod in inventory for a year is 20% of its cost. The cost to Steco to place an order for replenishment is 25/order. Delivery lead time is one week. Management wants a less than 6% probability of stocking out. Assume 50 weeks per year. 

This is because in most studied planning problems stock outs are not allowed at all and, hence, shortages are explicitly prohibited. See MirHassani (2008) or Cafaro and Cerda (2008) for examples where both costs are considered. Note that in Cafaro and Cerda (2008) shortages are defined as tardily delivered batches. 

The final situation of the inventory Spi), which is the difference between the initial situation of the inventory Sit) and the demand received in the current period (D,), so that negative values show stock-out. 

It includes 18 buffers, 23 different types of chemicals, a total inventoiy level of approximately 5,000 items, and 10 replications of a production period of 7 months. The simulation study uses six performance measures to evaluate the overall performance of the two inventory models. These are defined as expired, normal use, ordered, stock-out, reallocated, and service level. Expired refers to the total number of TTSC that expire, which needs to be disposed of in an environmentally friendly manner. Normal use is the total number of time-sensitive materials that are available in designated buffers and are used in production. Ordered is the total number of time-sensitive materials ordered. Stock-out is the total number of TTSC requested by an operator but was not available in the buffer at the time of the demand. Reallocated is the total number of TTSC an operator obtains from an adjacent station. 

The proposed model was tested via simulation using different values for the two smoothing parameters a and jS in order to determine their most effective values. As shown in Table 33.1, each level-combination of the smoothing parameters, a and P (i.e., sub-models), yields a different performance for different performance measures. For instance, on the one hand, the sub-model, where a = 0.8 and P = 0.2, yields the best result for Expired. On the other hand, the same submodel ranks number 8 for normal use, stock-out, and service-level metrics. Similar comparisons can be made for the other sub-models. 

Comparison Service level Expired Normal use Stock-out Reallocated Ordered... 

Primary purpose Supply predictable demand efficiently at the lowest possible cost Respond quickly to unpredictable demand in order to minimize stock outs and obsolete inventory... 

Fewer stock-outs with higher turnover... 

In the initial run of the game, each entity has a small stock of inventory, which is large enough to avoid any stock outs at the retailer assuming the forecast is correct and the lead times are met by each of the suppliers. Each entity is expected to receive orders from its customer and place orders for replenishment to its supplier. Other than receiving the orders, there is no communication allowed between the players. This is a simple, but realistic example of a supply chain. 

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