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Issue 4/ 2017, article 3

Authors: Stanisław Krzyżaniak

Title: INFLUENCE OF DELIVERY QUANTITY ON SERVICE LEVEL IN THE STOCK REPLENISHMENT SYSTEM BASED ON REORDER LEVEL FOR IRREGULAR DISTRIBUTIONS OF DEMAND

Keywords: stock management, stock replenishment based on BQ system, point of reorder, service level, simulation

Abstract:

Background. Due to random changes in demand, inventory management is still – despite the development of alternative goods flow management concepts – an important issue both in terms of costs of maintenance and replenishment, as well as the level of service measured by inventory availability levels. One of the classical replenishment systems is Reorder Point replenishment, in which orders of fixed quantity are placed whenever effective stock reaches the reorder level B. There is a well known relationship between level B and the service level, most often defined as the probability of filling in all orders within a replenishment cycle, although in practice – as demonstrated in the author’s earlier papers – some extensions of the commonly used formulas are necessary. The task becomes even more complicated in the case of unusual, peculiar patterns of demand distribution, significantly different from the norm, which is characteristic for slow moving goods. In this case a considerable influence of order/delivery quantities on actual stock levels triggering the replenishment cycle (lower than B) is observed. This phenomenon is reflected in the service level, which is lower than expected. The scientific aim of the research presented in the paper was to explain (based on results of simulation experiments) the observed phenomenon and to elaborate recommendations for establishing order quantities, which would have the slightest impact on service level.

Method. The subject of the research was to identify the scale of the phenomenon based on an example of an atypical demand distribution. To determine the influence of delivery quantity Q on difference Δ between reorder level B and the actual stock level at the moment when the order is placed, a simulation was conducted using a dedicated tool (a simulator in EXCEL). Since the relatively low scale of variability of difference Δ as a function of order quantity Q does not explain the scale of variability observed in the service level, a hypothesis was advanced and demonstrated (via the simulation) that the probability of a stock-out situation in two consecutive replenishment cycles depends on the nature and scale of changes of difference as a function of the difference between S and B levels steering the parameters of a BS replenishment system (being one of the MIN-MAX type replenishment systems)

Results. The results of the research on the influence of order/delivery quantity Q on service level (<SL) are presented. It has been shown that when determining order quantity Q, one has to take into account the difference Δ and its dependence on the difference between S and B levels which are the steering parameters of a BS replenishment system. A simple procedure is proposed to avoid the increased risk of a stock-out situation in two consecutive replenishment cycles, which leads to a decrease in service levels.

Conclusion. The results of the research presented here, as well as the proposed procedure, will support determination order quantity in a reorder point replenishment system (BQ), especially in case of peculiar, atypical demand distribution types. That makes it possible to avoid order quantities carrying a risk of decreased service levels. Elaboration of a complex model determining expected service level as a function of order/delivery quantity will require further investigation.

Full text available in in english in format: Adobe Acrobat pdf article nr 3 - pdf

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DOI: 10.17270/J.LOG.2017.4.3
For citation:

MLA Krzyżaniak, Stanisław. "Influence of delivery quantity on service level in the stock replenishment system based on reorder level for irregular distributions of demand ." Logforum 13.4 (2017): 3. DOI: 10.17270/J.LOG.2017.4.3
APA Stanisław Krzyżaniak (2017). Influence of delivery quantity on service level in the stock replenishment system based on reorder level for irregular distributions of demand . Logforum 13 (4), 3. DOI: 10.17270/J.LOG.2017.4.3
ISO 690 KRZYżANIAK, Stanisław. Influence of delivery quantity on service level in the stock replenishment system based on reorder level for irregular distributions of demand . Logforum, 2017, 13.4: 3. DOI: 10.17270/J.LOG.2017.4.3
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