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A comparison between the order and the volume fill rates for a base-stock inventory control system under a compound renewal demand process

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  • L 2006 01

    Final published version, 229 KB, PDF document

  • Department of Business Studies
  • CORAL - Centre for Operations Research Applications in Logistics
The order fill rate is less commonly used than the volume fill rate (most often just denoted fill rate) as a performance measure for inventory control systems. However, in settings where the focus is on filling customer orders rather than total quantities, the order fill rate should be the preferred measure. In this paper we consider a continuous review, base-stock policy, where all replenishment orders have the same constant lead time and all unfilled demands are backordered. We develop exact mathematical expressions for the two fill-rate measures when demand follows a compound renewal process. We also elaborate on when the order fill rate can be interpreted as the (extended) ready rate. Furthermore, for the case when customer orders are generated by a negative binomial distribution, we show that it is the size of the shape parameter of this distribution that determines the relative magnitude of the two fill rates. In particular, we show that when customer orders are generated by a geometric distribution, the order fill rate and the volume fill rate are equal (though not equivalent when considering sample paths). For the case when customer inter-arrival times follow an Erlang distribution, we show how to compute the two fill rates.
Original languageEnglish
Place of publicationAarhus
PublisherAarhus School of Business, Department of Business Studies
Pages16
ISBN (Electronic)8778820855
Publication statusPublished - 2006

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