An extension of the reorder point method by using advance demand spike information

Abstract

This article addresses a reorder point method with an extended inventory position. The inventory position is decreased by near future known demand spikes. This advance demand information helps to improve the performance of the reorder point method. The proposed extension leads to a hybrid model: make-to-stock for demand less than the spike threshold and make-to-order for demand greater than the spike threshold. Furthermore, the number of cycles is modeled more generally and takes into account that the replenishment order has lot-size Q or an integer multiple of Q. An iterative solution procedure is developed for the proposed model, and the numerical results are shown to underpin the usefulness of the approach.