Calculating inventory levels due to the random nature of customer orders is always associated with a certain degree of risk. Nevertheless, there are methods that allow this risk to be minimized.
Basic inventory replenishment methods include the
fixed order quantity method
and the
fixed order interval method.
The fixed order quantity method
requires continuous monitoring of inventory levels. When the inventory level drops below a certain critical reorder point, a signal is sent to the supplier to deliver a pre-agreed fixed quantity D. In addition to the aforementioned fixed delivery quantity, this method is characterized by a lack of ordering periodicity (generally T1
The fixed order interval method
involves
placing orders at fixed time intervals T. In the case of constant demand, a fixed delivery batch size would be maintained, but generally, the condition of constant demand is not met. Therefore, it can be assumed that in addition to fixed, predetermined ordering times (e.g., every Tuesday at 9:00 AM), this method is characterized by a variable delivery batch size.
The article comes from the magazine “Logistyka” no. 5/2005.