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A Periodic-Review Modeling Approach for Guaranteed Service Supply Chains

Optiant, Incorporated, Burlington, Massachusetts 01803
School of Management, Boston University, Boston, Massachusetts 02215
john.bossert{at}optiant.com
willems{at}bu.edu

We extend the guaranteed service, supply chain modeling framework to allow for an arbitrary, integer review period or ordering frequency at each stage. We define a notation for the cyclic inventory dynamics that review periods introduce and generalize inventory-balance equations to accommodate three different periodic-review operating policies—constant base stock, constant safety stock, and adaptive base stock. As a form of validation, we apply the model to the Celanese acetic acid supply chain and show that inventory metrics of the new model differ by more than 30 percent from those derived through the simpler modeling approach of aggregating a review period into lead time.

Key Words: multiechelon; inventory system; safety stock; optimization; dynamic programming application; review periods

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				J. J. Neale and S. P. Willems Managing Inventory in Supply Chains with Nonstationary Demand Interfaces, September 1, 2009; 39(5): 388 - 399. [Abstract] [PDF]