Approximate Stock Formulae for Use in Conjunction with the Assortment Problem

Abstract

This paper considers the calculation of the total stocks which must be held in order to maintain a given service level when the assortment problem approach of dynamic programming is used to select the standard stock sizes. Approximate formulae are derived to calculate the safety and working stocks for any number of standard sizes, assuming that the value of the demand for each stock size is approximately equal. It is shown that even very large reductions in the number of stock lines do not produce correspondingly large reductions in stock levels.