Safety stock over lead-time

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Description

SSL computes the safety stock level over lead-time for three forecasting methods: Minimum Mean Square Error (MMSE), Simple Moving Average (SMA) and Exponential Smoothing (ES) when the demand follows a stationary AR(1) stochastic process.

Usage

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SSL(method = c("MMSE", "SMA", "ES"), phi, L, p, alpha, SL)

Arguments

method

character string specifing which forecasting method to use,

phi

a vector of autoregressive parameters,

L

a positive lead-time,

p

the order to be used in the SMA method,

alpha

smoothing factor to be used in the ES method (0 < alpha < 1),

SL

service level.

Details

SSL is calculated using an estimate of the standard deviation of forecasting error for lead-time demand √{Var(D_t^L-\hat{D}_t^L)} where \hat{D}_t^L is an estimate of the mean demand over L periods after period t.

Value

The safety stock level over the lead-time.

Author(s)

Marlene Silva Marchena marchenamarlene@gmail.com

References

Silva Marchena, M. (2010) Measuring and implementing the bullwhip effect under a generalized demand process. http://arxiv.org/abs/1009.3977

Zhang, X. The impact of forecasting methods on the bullwhip effect, International Journal of Production Economics.l, v.88, n.1, p. 15-27, 2004a.

See Also

SCperf

Examples

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SSL("MMSE",0.15,2,4,0.7,0.95)

SSL("SMA",0.15,2,4,0.7,0.95)

SSL("ES",0.15,2,4,0.7,0.95)