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Policy Writeup

The document discusses different inventory management policies including reorder point (RP), order quantity (Q), and reorder point and order quantity (RSQ). RP signifies the inventory level that triggers a new order and is calculated as demand during lead time plus safety stock. Q represents the amount ordered per order, often optimized using economic order quantity. RSQ integrates RP and Q to balance holding costs, ordering costs, and stockout risks. Implementing these policies helps businesses optimize inventory levels, minimize costs, and enhance efficiency.

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dey.joybroto
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9 views

Policy Writeup

The document discusses different inventory management policies including reorder point (RP), order quantity (Q), and reorder point and order quantity (RSQ). RP signifies the inventory level that triggers a new order and is calculated as demand during lead time plus safety stock. Q represents the amount ordered per order, often optimized using economic order quantity. RSQ integrates RP and Q to balance holding costs, ordering costs, and stockout risks. Implementing these policies helps businesses optimize inventory levels, minimize costs, and enhance efficiency.

Uploaded by

dey.joybroto
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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So now we will be talking about some of the inventory policies.

RS (Reorder Point), SQ (Order Quantity), and RSQ (Reorder Point and Order Quantity)
are key terms in inventory management. The Reorder Point (RP) signifies the
inventory level triggering a new order, calculated as the demand during lead time
plus Safety Stock. Order Quantity (Q) represents the amount to be ordered per order,
often optimized using Economic Order Quantity (EOQ). The RSQ model integrates RP
and Q, aiming to balance holding costs, ordering costs, and stockout risks.
Implementing these models enables businesses to optimize inventory levels,
minimize costs, and enhance operational efficiency, with variations based on specific
industry needs and supply chain dynamics.

So the architecture of inventory policy simulation dashboard shows the process of


using a inventory policy simulation to generate a report explaining each level of the
stock simulation.

The process begins with Jupyter, to generate demand during each review period in
the stock simulation.

The data is then preprocessed. This involves checking for ample historical demand
data in the order table. If there is enough data, the mean and standard deviation of
the historical demand is calculated. If there is not enough data, a normal (Gaussian)
distribution is used to generate random demand.

Once the data has been preprocessed, the simulation can begin. The simulation
iterates over each product-location pair in the inventory stores. For each product-
location pair, the following parameters are used:

 Review period: This is the time between order reviews.


 Lead time: This is the time it takes for an order to be delivered.
 Reorder point: This is the level of stock at which an order is placed.
 Service level: This is the percentage of time that a demand can be met
immediately.

The simulation is run at different service levels, ranging from 0.5 to 0.99.

The results of the simulation are stored in a BigQuery table. This table can be used
to generate reports that show the impact of different inventory policies on the various
metrics.
RS Dashboard:

Here in the simulation Dashboard we are comparing periodic review (R) and an
order up to level (S).

The dashboard shows the following information for each policy:

 In transit stock: This is the amount of inventory that is currently on order and
has not yet arrived.
 Safety stock: This is the amount of inventory that is kept on hand to buffer
against unexpected fluctuations in demand.
 Cycle stock: This is the amount of inventory that is typically on hand between
orders.
 On-hand stock: This is the total amount of inventory that is currently available.
 Inventory cost: This is the total cost of carrying inventory.
 Fill rate: This is the percentage of customer orders that are filled from stock.

The dashboard also shows a graph of the total inventory level over time for each
policy.

SQ Dashboard:

Here the dashboard shows four key performance indicators (KPIs): inventory level,
reorder point, the order-up-to level, and total cost.

The chart at the bottom of the dashboard shows the inventory dynamics over time. It
highlights the inventory level starts at a point and decreases over time as demand is
met. At that point, an order is placed for enough units to bring the inventory level
back up to the order-up-to level.

RSQ Dashboard:

The dashboard shows an inventory policy simulation for product at a location. The
simulation is based on an (R,s,Q) policy, where R is the reorder point, s is the safety
stock level, and Q is the order quantity.

It does show the few of the KPI’s

The graph shows the on-hand inventory, safety stock, and demand over time. The
on-hand inventory is shown in blue, the safety stock is shown in green, and the
demand is shown in red.
The simulation shows that the inventory level fluctuates up and down over time. The
inventory level reaches a peak of about 333 units at time 20 and then falls to a low of
about 10 units at time 90.

The simulation also shows that there are two stockouts during the simulation period.
The first stockout occurs at time 30 and the second stockout occurs at time 80.

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