Periodic review inventory systems with a service level criterion

Marco Bijvank

Research output: Contribution to journalArticleAcademicpeer-review

9 Citations (Scopus)


Full-cost inventory models are mostly studied in the literature, whereas service level constraints are more common to be observed in practical settings. In this paper, we consider periodic review inventory systems with service level restrictions. The control of such inventory systems is limited to (s,S)-type policies in the literature. To the best of our knowledge, we are the first authors to compare such policies with optimal replenishment policies, and illustrate an average cost difference of 0.64%. This justifies the use of these popular (s,S) policies in practice. Furthermore, we propose a new one-dimensional search procedure that is bounded to set the reorder level s and order-up-to level S, whereas the solution space is unbounded and two dimensional. Our heuristic procedure is guaranteed to satisfy the service level constraint and numerical experiments illustrate that it results in an average cost deviation of 1-2% compared with the best (s,S) policy. Consequently, it significantly outperforms all existing procedures from literature, both in service and costs.
Original languageEnglish
Pages (from-to)1853-1863
Number of pages11
JournalThe Journal of the Operational Research Society
Issue number12
Publication statusPublished - 27 Nov 2013


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