An Application of Marginal Return Analysis to Efficient Reorder Point Calculation.
Abstract
One of the important uses of an EOQ item's probability distribution of demand during leadtime is to establish the reorder point. The current Air Force System computes the reorder point of each item independently. This research shows that a more efficient calculation considers a homogeneous grouping of parts as an entity and bases the reorder point on the individual item's marginal return. In other words, the reorder point for each item is based on the gain in safety stock insurance per dollar invested relative to other items in the homogeneous grouping. Data from six federal stock groups and three Air Force bases are analyzed. Approximately 3,000 items are involved in the performance comparisons. An examination is made of modifying the marginal return to accommodate the 'essentiality' of individual items. Following this effort the reorder point for each item is then coupled with a more nearly optimal order quantity.
Document Details
- Document Type
- Technical Report
- Publication Date
- Feb 01, 1981
- Accession Number
- ADA096565
Entities
People
- Robert A. Rappold
Organizations
- United States Air Force Academy