A Performance Comparison of Two Stockage Policies

Two alterntive stockage policies are compared - the demand approach, wherein the most frequently requested items are stocked, and an economic approach, wherein relatively high demand but low cost items are stocked. The comparison is based on empirical demand history data from Europe, and considered the supply performance provided and the costs incurred under each policy. This is accomplished using the RAC Supply Point Simulation Model (SPSM). The demand approach achieves lower zero balance rates, fewer shortages, less duration of shortages, and less workload. The economic approach yields shorter duration of due-outs, due to every good performance on items of low cost per demand. Thus, a larger stockage list at lower inventory investment results with the economic approach. (Author)