Intermittent Demand Forecasting

3Service Level Measures

3.1 Introduction

In Chapter 2, we reviewed inventory rules that may be used to manage the stock of intermittent demand items, paying particular attention to the and policies. In both of these policies, the inventory position is reviewed every periods, and enough stock is ordered to raise it to the order‐up‐to level, , also known as the OUT level. We noted that is often used for intermittent demand items because of its simplicity and robustness.

The policy requires the determination of the review interval and OUT level for each individual stock keeping unit (SKU). In practice, the review interval is usually set to be the same for all SKUs or for whole classes of SKUs, for reasons that were discussed in Chapter 2. The setting of the review interval varies according to industry sector. In grocery retail, this may be every day or half day, whereas in automotive ...