Measuring item fill-rate performance in a finite horizon

Douglas J. Thomas

Research output: Contribution to journalArticle

40 Citations (Scopus)

Abstract

The standard treatment of fill rate relies on stationary and serially independent demand over an infinite horizon. Even if demand is stationary, managers are held accountable for performance over a finite horizon. In a finite horizon, the fill rate is a random variable. Studying the distribution is relevant because a vendor may be subject to financial penalty if she fails to achieve her target fill rate over a specified finite period. It is known that for a zero lead time, base-stock model, the expected value of a finite-horizon fill rate exceeds the long-run fill rate. In this paper, I investigate the behavior of the distribution of the finite-horizon fill rate when a stationary base-stock policy is used to control inventory. For a vendor facing a finite-horizon, fill-rate-level contract and using a stationary stocking policy, I examine how the the length of the review horizon (i.e., monthly or quarterly), the demand distribution, and the cost of failing to meet the target affect the stocking decision.

Original languageEnglish (US)
Pages (from-to)74-80
Number of pages7
JournalManufacturing and Service Operations Management
Volume7
Issue number1
DOIs
StatePublished - Dec 1 2005

Fingerprint

Inventory control
Random variables
Managers
Costs
Finite horizon

All Science Journal Classification (ASJC) codes

  • Strategy and Management
  • Management Science and Operations Research

Cite this

@article{95f7c8c2e4464ed9b011868a92fce3f0,
title = "Measuring item fill-rate performance in a finite horizon",
abstract = "The standard treatment of fill rate relies on stationary and serially independent demand over an infinite horizon. Even if demand is stationary, managers are held accountable for performance over a finite horizon. In a finite horizon, the fill rate is a random variable. Studying the distribution is relevant because a vendor may be subject to financial penalty if she fails to achieve her target fill rate over a specified finite period. It is known that for a zero lead time, base-stock model, the expected value of a finite-horizon fill rate exceeds the long-run fill rate. In this paper, I investigate the behavior of the distribution of the finite-horizon fill rate when a stationary base-stock policy is used to control inventory. For a vendor facing a finite-horizon, fill-rate-level contract and using a stationary stocking policy, I examine how the the length of the review horizon (i.e., monthly or quarterly), the demand distribution, and the cost of failing to meet the target affect the stocking decision.",
author = "Thomas, {Douglas J.}",
year = "2005",
month = "12",
day = "1",
doi = "10.1287/msom.1040.0064",
language = "English (US)",
volume = "7",
pages = "74--80",
journal = "Manufacturing and Service Operations Management",
issn = "1523-4614",
publisher = "INFORMS Inst.for Operations Res.and the Management Sciences",
number = "1",

}

Measuring item fill-rate performance in a finite horizon. / Thomas, Douglas J.

In: Manufacturing and Service Operations Management, Vol. 7, No. 1, 01.12.2005, p. 74-80.

Research output: Contribution to journalArticle

TY - JOUR

T1 - Measuring item fill-rate performance in a finite horizon

AU - Thomas, Douglas J.

PY - 2005/12/1

Y1 - 2005/12/1

N2 - The standard treatment of fill rate relies on stationary and serially independent demand over an infinite horizon. Even if demand is stationary, managers are held accountable for performance over a finite horizon. In a finite horizon, the fill rate is a random variable. Studying the distribution is relevant because a vendor may be subject to financial penalty if she fails to achieve her target fill rate over a specified finite period. It is known that for a zero lead time, base-stock model, the expected value of a finite-horizon fill rate exceeds the long-run fill rate. In this paper, I investigate the behavior of the distribution of the finite-horizon fill rate when a stationary base-stock policy is used to control inventory. For a vendor facing a finite-horizon, fill-rate-level contract and using a stationary stocking policy, I examine how the the length of the review horizon (i.e., monthly or quarterly), the demand distribution, and the cost of failing to meet the target affect the stocking decision.

AB - The standard treatment of fill rate relies on stationary and serially independent demand over an infinite horizon. Even if demand is stationary, managers are held accountable for performance over a finite horizon. In a finite horizon, the fill rate is a random variable. Studying the distribution is relevant because a vendor may be subject to financial penalty if she fails to achieve her target fill rate over a specified finite period. It is known that for a zero lead time, base-stock model, the expected value of a finite-horizon fill rate exceeds the long-run fill rate. In this paper, I investigate the behavior of the distribution of the finite-horizon fill rate when a stationary base-stock policy is used to control inventory. For a vendor facing a finite-horizon, fill-rate-level contract and using a stationary stocking policy, I examine how the the length of the review horizon (i.e., monthly or quarterly), the demand distribution, and the cost of failing to meet the target affect the stocking decision.

UR - http://www.scopus.com/inward/record.url?scp=25144440479&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=25144440479&partnerID=8YFLogxK

U2 - 10.1287/msom.1040.0064

DO - 10.1287/msom.1040.0064

M3 - Article

AN - SCOPUS:25144440479

VL - 7

SP - 74

EP - 80

JO - Manufacturing and Service Operations Management

JF - Manufacturing and Service Operations Management

SN - 1523-4614

IS - 1

ER -