A time-phased order-point system in environments with and without demand uncertainty: a comparative analysis of non-monetary performance variables

Abstract

SUMMARY This paper considers the multi-dimensional effects of demand uncertainty (and other environmental characteristics) in connection with a time-phased order-point system in a rolling schedule environment. Recorded performance variables were: the number of stockouts, the maximum stockout in a period, the service level, the inventory level and the number of orders placed. The system was observed under three conditions: no demand uncertainty, demand uncertainty present but no safety stocks and demand uncertainty present with safety stocks to counter its effects. Stockouts, larger inventories and more orders occurred simultaneously when demand uncertainty was introduced in the operating environment. Service levels were reduced and inventory levels increased when forecast errors became larger. Injection of safety stocks to counter the effect of the forecast errors further increased the inventory levels and the order frequency. The dramatic differences between environments with and without demand uncertain...