Evaluation and selection of periodic inventory review policy for irregular demand: A case study

Abstract

Periodic inventory review systems are generally preferred by organizations but the selection of right periodic inventory control policy is a challenge especially when demand is irregular. In this research, we classify irregular demand into erratic, slow moving and lumpy for a real industry case, and further develop three periodic review policies for performance evaluation. The simulation results show periodic review policy (r, Q) maintains the lowest holding inventory for erratic and slow moving demand, meanwhile, it can achieve similar service level compared to (s, S) policy. Periodic review policy (T, R) is superior for lumpy demand which can ensure high service level. The impact of coefficient of variation (CV2), a standardized measure of the dispersion of demand, on inventory policy performance is evaluated in the first time in literature. The results suggest inventory policies are rather insensitive to the variation of demand CV2 under the modeling condition.