Proposal of Reorder Point Satisfying Allowable Shortage Rate under Limited Demand Information

Abstract

The conventional reorder point system has been studied by many researchers, and is still an important issue in inventory management. In the continuous review system, the reorder point is set as an inventory level so that the shortage rate during the procurement lead time becomes less than or equal to the specified allowable level. The conventional design of the reorder point is based on the assumption that demand follows a normal distribution. However, this assumption is not always appropriate. In this study, the design of the reorder point using the limited demand information is proposed.