Emergency inventory ordering assuming Poisson demands

Abstract

Most business and industrial firms use some procedure for emergency ordering. If independent demand for low-volume, high-cost items is Poisson distributed, subsequent analyses reveal that emergency ordering may be less expensive than carrying extra safety stock. Emergency ordering reduces the out-of-stock cost as well as the required safety stock. Total cost is sensitive to the lead time required for emergency orders. The results are particularly applicable to maintenance inventory. Under the assumptions of this study, the conclusion may be drawn that an emergency ordering system may approach the theoretical minimum for operating an inventory system.

Notes

DR CHARLES R. WHITE, Ph.D., P.E., received a BSME in 1955, a Master of Science in Industrial Engineering in 1957 and a Ph.D. (IE) in 1963 all from Purdue University. He served as an Operations Research Analyst at Armour and Company in Chicago for three years. He joined the faculty at Auburn University in 1966. During the energy crisis in 1973-74 he served the State of Alabama as Chief of Energy Conservation. He is currently a Brigadier General in the Air Force Reserve. He has served as a consultant for numerous companies and has co-authored one textbooks, Operations Planning and Control. His professional societies include The Institute of Industrial Engineers, Decision Sciences Institute, The Institute of Management Sciences, and The American Society for Engineering Education.

BONNIE R. WHITE Ed.D., CPS, is an Assistant Professor in Vocational Education at Auburn University. She received her Ed.D. from The University of Tennessee and master's degrees from Eastern Kentucky University and Florida State University. Among other professional affiliations, she is a member of the Delta Pi Epsilon national honorary research fraternity. Her current research interest is administrative office systems and their related instructional delivery systems. She has co-authored a text in that area, Office Procedures: Learning and Instruction.