Dynamic re-order point inventory control with lead-time uncertainty: analysis and empirical investigation
- 23 March 2009
- journal article
- research article
- Published by Informa UK Limited in International Journal of Production Research
- Vol. 47 (9), 2461-2483
- https://doi.org/10.1080/00207540701666824
Abstract
A new forecast-based dynamic inventory control approach is discussed in this paper. In this approach, forecasts and forecast uncertainties are assumed to be exogenous data known in advance at each period over a fixed horizon. The control parameters are derived by using a sequential procedure. The merits of this approach as compared to the classical one are presented. We focus on a single-stage and single-item inventory system with non-stationary demand and lead-time uncertainty. A dynamic re-order point control policy is analysed based on the new approach and its parameters are determined for a given target cycle service level (CSL). The performance of this policy is assessed by means of empirical experimentation on a large demand data set from the pharmaceutical industry. The empirical results demonstrate the benefits arising from using such a policy and allow insights to be gained into other pertinent managerial issues.Keywords
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