This article contains information concerning the mathematics involved in the spreadsheets which are described in Part 1. That article was revised on 5 March 2017 and the spreadsheets were revised on 19 February 2017. It is assumed that the readers of this article have some knowledge of statistical mathematics. Any row which is concerned with […]

# Archive | Replenishment

## Lead Time Analysis – Part 1

Replenishment decisions rely on forecasts of lead times amongst other things. If the mean lead time for an item is not expected to change much then the average of recent lead times for the item can be used. Unless that item is purchased frequently, there won’t be many lead times to use for averaging purposes. […]

## Principles of Good Inventory Management

It is easy to reduce investment in inventory if you don’t mind a deterioration in customer service. Likewise, it is easy to provide good customer service if you don’t mind having a large investment in inventory. Good inventory management is concerned with having a low investment in inventory in relation to the customer service provided […]

## An Educational Inventory Management Simulator

I have developed an inventory simulation spreadsheet for educational purposes. It provides two facilities which are not provided by the online simulator which is accessed by means of the “Simulator” tab. The additional facilities are graphs and use of your own demand history. The online facility is more versatile than the spreadsheet. Also, it carries […]

## Monte Carlo Simulator – Part 2

This article contains detailed information concerning the online Monte Carlo inventory management simulator which can be accessed by clicking on the “Simulator” tab in the menu at the top of the page. In parts of this article, it will be assumed that the reader has some knowledge of statistics. If you don’t have a statistical […]

## Monte Carlo Simulator – Part 1

There is now an online Monte Carlo inventory management simulator available for use. Clicking on the “Simulator” tab in the menu at the top of the page will open the simulator in a new browser tab. Click here for instructions for using it. Each simulation is carried out for each day until there have been […]

## Inventory Management Simulation

This article provides an overview of inventory management simulation and its use for testing algorithms. If you want to use a particular algorithm for demand forecasting or reordering then it is desirable to simulate the effects first in order to avoid unpleasant surprises. A useful starting point is to use a spreadsheet to gain a […]

## Reducing Ordering Delays

Introduction The lead time for an item starts when the item should be ordered, not when the order is sent to the supplier. To find out the effect on the required investment in inventory of that time difference, see the table in the article entitled “Reducing Lead Times”. If a periodic review replenishment system is […]

## What is Optimal Replenishment?

Introduction Claims that particular software packages provide optimal inventory management are commonplace. Such claims, by themselves, are meaningless. They only become meaningful if there is a full description of the theoretical assumptions involved and of the objective function (whatever is to be minimised or maximised). Total Cost as the Objective Function Total cost is […]

## Replenishment Cycle

Consider what I will refer to as the “net quantity” of an item which is the quantity on hand plus the quantity on supplier order minus the quantity on customer back order. Reordering takes place when the net quantity falls strictly below a level known as the reorder point (ROP). Notice that reordering does not […]