DETECTING DEMAND CHANGES
DECISION STUDIES GROUP PALO ALTO CA
Pagination or Media Count:
A periodic review inventory system is viewed as a servomechanism in which the input is demand and the output is the inventory level. Under the assumptions that lead time is fixed and demand is random, an order rule is determined which minimized the long run average inventory. The order rule allows for any method of forecasting future demands and completely determines the operating doctrine for each such method. Graphical portrayal is used to illustrate the essential features of the model in a servomechanism setting. Special cases, in which mean demand is specified and exponential smoothing is adopted as a forecasting technique are examined in detail. In particular, one of these examples treats of the case where an item changes from a slow mover to a moderately fast to fast mover.
- Operations Research