Changes in performance under various lengths of review periods in a periodic review inventory control system with lost sales: A simulation study

Abstract

Purpose: This study investigates the impacts of changing the length of review period on the performance of a periodic review system with lost sales under varying demand patterns by using simulation method. Design/methodology/ approach: The simulation model has been built using a spreadsheet program and depicts a special case of several retailers supplied by a central warehouse. Simulation scenarios are created based on two factors: length of the review period, and product type in terms of the average and standard deviation of the corresponding product's demand distribution. Findings: Results obtained from the simulation model show that inventory performance is quite sensitive to the duration of review periods, and selecting the appropriate period length is largely dependent on the variability of demand. Specifically, relatively shorter review periods are required for products with high variable demand, while the inventory system can tolerate longer review periods if the product demand is less fluctuating. Originality/value: The study provides some practical guidelines for the inventory managers regarding the selection of an appropriate length for a review period in a periodic review system with lost sales. © Emerald Group Publishing Limited. © 2006 Elsevier B.V., All rights reserved.