*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.*

If the customer allows a *minimum delivery lead time*, then we know all the *allocated
quantities* or *reserved quantities* (i.e.
the demand that is linked to released customer orders or assigned to production
orders; see the definitions in Section 12.1.1) during this period of time. This
is true for all customer or production orders that require the item. Thus, we
can choose the time to release according to the formula in Figure 11.3.2.1.

Since the demand that is to be determined stochastically must now cover only a reduced lead time, the technique becomes more deterministic and precise — particularly in the case of trends that are not considered by the forecast model.

**Fig. 11.3.2.1 **Criterion for the release of a production or procurement order, if the customer allows a minimum delivery lead time.

Production or procurement orders can be released earlier than necessary:

The *anticipation horizon* refers to the maximum anticipated time for consideration of early release of a production or procurement order.

Figure 11.3.2.2 shows a formula to identify the items that are candidates for an early release. For techniques with an early issuance of production orders, see Section 15.1.3.

**Fig. 11.3.2.2** Criterion for an early issuance of a production or procurement order.

The saw-toothed curve — which stands for the optimal functioning of the order point technique — is best attained if the issue quantities are small compared to the production or procurement batch size. If instead they are relatively large, a chopped-off saw-toothed curve results. For issue quantities on the order of the production or procurement batch size, the resulting curve looks more like the shape of human teeth with gaps between them. Then, the order point technique no longer yields satisfactory results. Here see Section 12.3.1.

*Continuation in next subsection (11.3.2b).*

## 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.

##### 11.3.1b Order Point Calculation

Intended learning outcomes: 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.

##### 11.3.2b The Min-Max Reorder System and the Double Order Point System

Intended learning outcomes: 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.

##### 11.3.3b Service Level, Safety Factor, and Service Function

Intended learning outcomes: Explain safety stock in relation to service level. Identify the safety factor and the service function.

##### 11.3.3c Safety Stock Calculation with Continuous Demand Following a Normal Distribution

Intended learning outcomes: Disclose the normal integral distribution function (service function) to determine the safety factor that corresponds to a desired service level. Present the formula for safety stock.

##### 11.3.3d Safety Stock Calculation with Continuous Demand Following a Poisson Distribution

Intended learning outcomes: Disclose the Poisson distribution integral function to determine the safety factor that corresponds to a desired service level.

##### 11.3.4 Determining the Service Level on the Basis of Stockout Costs

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.

##### 11.3.4b Determining the Relation of Service Level to Stockout Quantity per Order Cycle

Intended learning outcomes: 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.

##### 11.3.4c Determining the Relation of Service Level to Fill Rate

Intended learning outcomes: Produce an overview on and examples of the relation between fill rate and service level.