Integral Logistics Management — Operations Management and Supply Chain Management Within and Across Companies

11.3 ROP (Re)-Order Point Technique, and Safety Stock Calculation

Intended learning outcomes: Explain the (re-)order point technique and variants thereof. Describe the safety stock calculation with continuous demand. Disclose the determination of the service level and the relation of service level to fill rate.



Course section 11.3: Subsections and their intended learning outcomes

  • 11.3 ROP (Re)-Order Point Technique, and Safety Stock Calculation

    Intended learning outcomes: Explain the (re-)order point technique and variants thereof. Describe the safety stock calculation with continuous demand. Disclose the determination of the service level and the relation of service level to fill rate.

  • 11.3.1 The ROP (Re)-Order Point Technique

    Intended learning outcomes: Present in detail characteristic data for the (re-) order point technique. Explain the (re-)order point calculation. Identify the criterion for the release of a production or procurement order.

  • 11.3.2 Variants of the Order Point Technique

    Intended learning outcomes: Identify the criterion for the release of a production or procurement order, if the customer allows a minimum delivery lead time. Explain the criterion for an early issuance of a production or procurement order. Produce an overview on the min-max (reorder) system. Describe the double order point system.

  • 11.3.3 Safety Stock Calculation with Continuous Demand

    Intended learning outcomes: Describe Different techniques for determining safety stock. Identify different patterns of the deviation of demand from forecast. Explain safety stock in relation to service level. Produce an overview on the normal integral distribution function (service function) and the Poisson distribution integral function. Present the formula for safety stock.

  • 11.3.4 Determining the Service Level and the Relation of Service Level to Fill Rate

    Intended learning outcomes: Describe the order point technique where the length of order cycle provided by the batch size is a multiple of the lead time. Explain the probability of stockout in dependency on stockout costs per unit. Present the service function (of the stockout quantity coefficient) P(s) in dependency upon the safety factor s. Produce an overview on and examples of the relation between fill rate and service level.



Course 11: Sections and their intended learning outcomes

  • 11.3 ROP (Re)-Order Point Technique, and Safety Stock Calculation

    Intended learning outcomes: Explain the (re-)order point technique and variants thereof. Describe the safety stock calculation with continuous demand. Disclose the determination of the service level and the relation of service level to fill rate.

  • 11.4 Batch Sizing, or Lot Sizing

    Intended learning outcomes: Produce an overview on production or procurement costs, batch-size-dependent unit costs, setup and ordering costs, and carrying cost. Explain optimum batch size, optimum length of order cycle, the classic economic order quantity formally and in practical application. Disclose extensions of the batch size formula.

  • 11.5 Summary

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  • 11.6 Keywords

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  • 11.7 Scenarios and Exercises

    Intended learning outcomes: Calculate examples for the ABC Classification. Disclose the ABC-XYZ analysis in materials management. Differentiate between safety stock variation and demand variation. Determine batch size depending on stockout costs. Assess the effectiveness of the order point technique.

  • 11.8 References

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