Low Demand Items Research Articles

A model for procurement, allocation, and redistribution for low demand items

AbstractProblems of inventory control for items with extremely low demand (say less than one unit per month average demand) have received relatively little attention in the literature. However, for military supply systems it is well known that an extremely large proportion of the total number of items fall into this category. The problem of designing a control system for these low demand items is therefore one of the most critical inventory management problems faced by the National Military Establishment.In the following, a single echelon, multidepot supply system is studied for low demand items having a stationary Poisson probability distribution for demand. Instantaneous information concerning inventory levels is assumed to be available. Procurement lead time is assumed to be constant as well as the time required for either of two available modes of redistribution. Items are ordered one at a time and decision rules are developed for allocation of new procurement, redistribution of stocks among the depots, and for determining system and depot stockage objectives in order to minimize the expected costs resulting from system and depot stockouts, cost of redistributing stocks among the depots, and costs of transportation from the source. The model is an extension of previous models in that redistribution costs and depot stockout costs are considered in the determination of the stockage objective for the system as a whole. When more than a single unit is on order, the allocation of a unit ready to be delivered is determined by the solution of a dynamic programming problem. When only a single unit is on order (and this is the one ready to be delivered), the optimal allocation procedure is reduced to allocating the unit to the depot which has the greatest probability of using it in a time period T + (1/λ) where T is the procurement lead time and λ the system demand rate for the item.

The costs of alternative air base stocking and requisitioning policies

AbstractThis is a mathematical and statistical study of the supply operations at a typical Air Force base. The objective of the study is to determine the effect upon support cost of different logistics policies, involving changes in safety level and requisitioning frequency. This effect is found to vary according to the price and demand rate of the item being considered, and the study indicates that large monetary savings can be realized by adopting different stocking and requiritioning policies dependent upon item demand and price. Thus, the study indicates that it is more economical to have items costing under $10 requisitioned from the depot every three or six months, rather than every month, even if obsolescence charges on base stocks are as high as 50 per cent per year. The study has also indicated that standby stockage of cheap (under $10), low demand items is desirable because the cost of such stockage tends to be less than the costs incurred by premium supply action when a demand for such an item ariees.