On the Order Fill Rate in a Multi-Item, Base-Stock Inventory System

Abstract

A customer order to a multi-item inventory system typically consists of several different items in different amounts. The probability of satisfying an arbitrary demand within a prespecified time window, termed the order fill rate, is an important measure of customer satisfaction in industry. This measure, however, has received little attention in the inventory literature, partly because its evaluation is considered a hard problem. In this paper, we study this performance measure for a base-stock system in which the demand process forms a multivariate compound Poisson process and the replenishment leadtimes are constant. We show that the order fill rate can be computed through a series of convolutions of one-dimensional compound Poisson distributions and the batch-size distributions. This procedure makes the exact calculation faster and much more tractable. We also develop simpler bounds to estimate the order fill rate. These bounds require only partial order-based information or merely the item-based information. Finally, we investigate the impact of the standard independent demand assumption when the demand is actually correlated across items.