________________________________________

: Corresponding Author
A scheduling based reorder point system with variable
lead time in a multi-item production environment



Jeongja Jeong

1
and Takashi Irohara
2

Sophia University
7-1 Kioi-cho, Chiyoda-ku, Tokyo 102-8554, Japan
Email:jajaja@sophia.ac.jp
1

irohara@sophia.ac.jp
2




Abstract. The reorder point system(RPS) in a multi-item production environment is addressed in this paper.
The RPS-based inventory control system is the most common procedure for order-release planning in a dis-
crete parts environment. Generally, manufacturers need to be more responsive to dynamic markets in order to
save a cost while keeping the competitiveness. However the traditional reorder point has been calculated with
fixed lead time which is estimated by using historical data or past experiences. And also, in an actual invento-
ry control, the lead time does change and assuming fixed lead time is quite unrealistic. However, a large
change in lead time may result in excessive stock or shortage of supply. And this assumption is outdated be-
cause of its inability to accurately capture the dynamics of the production environment. In reality, lead times
may be dependent upon dynamic conditions: amount of load in the shop, capacity of the shop, the order prior-
ity, resource schedules, part routings, order lot size, and shop rules and constraints. To support the planning
function for an agile manufacturing environment, a planning system must consider real-world capacities so
that the order-release plan generated is feasible. In this paper, a new approach to the RPS, in which the lead
time is estimated by scheduling, is proposed. The RPS planning approach in the flow shop and the job shop
production environment are considered. New approach to the RPS is compared against the traditional reorder
point system. The numerical experiment shows the effectiveness of the proposed approach.

Keywords: Reorder point, inventory, dynamic, lead-time, multi-item, scheduling.



1. INTRODUCTION

Recent years, manufacturers need to be more respon-
sive to dynamic market demands and reduce costs and deal
with short product life cycle(Jimmie browne et el. 1996) in
order to be competitive. At this point, inventory plays a
major role in deciding the overall manufacturing costs, and
a good scheduling system should balance the on-time deli-
very of products low inventory. But, typical mass produc-
tion environment that is characterized by large on-hand
inventory, economic order quantity (Hillier et al. 2001)(K.L.
HOU et al. 2006) are now being transformed into multipro-
duct production environments characterized by zero inven-
tory, short production lead time. So, in an advanced plan-
ning and scheduling environment, manufacturers are ob-
liged to estimate due dates for customer orders and satisfy
their requirements (M. Kuroda et al. 2008). Michael masin
et al. presents an auction-based algorithm for simultaneous
scheduling to minimize both the due date and inventory
cost (Michael et al. 2007). G.Z Mincsovics et al. estimate
due date by workload-dependent capacity control (G.Z
Minsovics et al. 2009). Joanna jozefowska propose produc-
tion planning and control philosophy that seeks to eliminate
waste of waiting time, overproduction and inventory (Joan-
na jozefowska et al. 2007). And, Ota takako Study on the
Optimum Ordering Quantity for Products with a Short De-
terioration Time (Ota takako et al. 1974).
In this paper, we propose a reorder point system aim-
ing to keep proper inventory under dynamically changing
situation. And, in this study, we propose the RPS which
decreases the over stock and stock out. Conventional RPS
is no longer acceptable because it cant respond to dynamic
APIEMS2009 Dec. 14-16, Kitakyushu
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demands.
The Conventional RPS has assumed production lead
time as fixed value which is calculated by past experience,
historical data. But if load excess the capacity of system,
there would be waiting queue in front and behind produc-
tion facilities and lead time will be long. In addition, if the
systems handle various products, lead time varies according
to producing products. Therefore it is inadequate to set
unique reorder point because production lead time changes
time to time according to status of system. In this paper, we
propose a RPS approach considering variable lead time and
multi-item manufacturing environment.

2. CONVENTIONAL MODEL

2.1 Conventional RPS(1)

Conventional RPS(1) is one of the most common me-
thods of stock control. If stock of item fall below preset
reorder point, RPS makes order to replenish stock (Hillier
et al. 2001)(G. Hadley et al. 1963).
In practice, there is lead time between order placement
and arrival of item. Therefore RPS sets reorder point consi-
dering the lead time and safety stock. The safety stock is a
term used by inventory specialists to describe a level of
extra stock that is maintained below the cycle stock to buf-
fer against stock out. Conventional RPS(1) is calculated as
below.

Reorder
point
L
I
n
v
e
n
t
o
r
y

l
e
v
e
l
L L
time

Figure 1 : Reorder point and lead time


K (1)

K : reorder point
L : production Lead time
o : safety stock coefficient
: standard deviation of demand per period
d : average demand per period

The production lead time L of the conventional R
PS(1) is estimated as fixed value which be calculated
by preset lead time. Hear, the preset lead time is
calculated as sum of processing time and expected
waiting time.

2.2 Conventional RPS(2)

Conventional RPS assumes production lead time is set
as fixed value and it is calculated as sum of processing time
and room time. In conventional RPS(2), production lead
time is figured out by discrete random variable as figure 2
(Suguro Takao et al. 2004).
Conventional reorder point is calculated as below.

K = (2)

(3)


L
i
: i th production lead time in ascending order
P(L
i
): probability of L
i

s : standard deviation of demand per period
r
o
: stock out allowable ratio
(for example, r
o
=5% => L
m
=6, r
o
=25%=> L
m
=5)
L
m
: lead time that satisfies the r
o
(m is calculated according to the formula (3). )

The conventional RPS(2) considered to reduce inven-
tory level through improvements in production lead time of
conventional RPS(1). Even so, it does not correspond with
practical situation in which lead time is not fixed value and
varies according to load status of the system.
0
10
20
30
40
50
60
1 2 3 4 5 6 7 8 9 10
e
v
e
n
t

p
r
o
b
a
b
i
l
i
t
y
Leadtime

Figure 2: Event probability of production lead time

3. PROPOSED MODEL

3.1 Proposed RPS

Considering the above, this paper proposes RPS that
L L d oo + =
m m
L s L d o +

=

=
s <
m
i
i o
m
i
i
L P r L P
1
1
1
) ( ) 1 ( ) (
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takes into account both production scheduling and process
load status for calculation of variable lead time.
The conventional RPS(1) has assumed production lead
time as fixed value. But if load excess the capacity of sys-
tem, there would be waiting queue in front and behind pro-
duction facilities and lead time will be long as figure 3,4.









Figure 3: In the absence of waiting time










Figure 4 : In the presence of waiting time

Incidentally, this study considers change of the waiting
time of production. Thus production lead time of pro-
posed RPS is variable by load status of production process.
The proposed RPS model approach is to take planned lead
times as input to the process scheduling. Specifically, a
waiting time occurs at the factory doing multi-item produc-
tion environment.
For example, we consider in the case of after a change
of production lead time as figure 5.

Conventional RPS : L
1
=L
2
=L
3
=L(L=preset lead time)
Proposed RPS : L
1
L
2
L
3

(L
t
=lead time of period t)
As in the example given above, proposed RPS form an
accurate estimate of production lead time for period t.
Reorder
point
L1
I
n
v
e
n
t
o
r
y

l
e
v
e
l
L2 L3
time

Figure 5: Lead time of period t

3.2 Algorithm

We propose the following algorithm to decide the
reorder point for product i=1,2,,N of the period t
=1,2,,T.
Initial state is1.
1) Scheduling in period t, and decide lead time
L
i, t

2) Set up reorder point based on the lead time
L
i, t
(2)
3) Quantity demanded d
i,t

4) Changes on the upgraded inventory level
(I
i,t+1
=I
i,t
- d
i,t
)
5) If the inventory is below the reorder point
level, production order is released. If the
order of multiple products occur at the same
time, set an order of priority (LPT : Longest
processing time). (I
i,t
< K
i,t
),
6) t=t+1.
7) go back to 1)

K
i, t
: Reorder point of period t for product i
d
i,t
: Demand of period t for product i
L
i, t
: Lead time of period t for product i
I
i, t
: Initial inventory of period t for product i
i d : Average demand of product i
i
o

: Standard deviation of demand for product i
N : Number of product


3.3 Structure of the proposed model

The proposed system consists of 2 warehouses and m
production machineries. The material warehouse is located
at the start of system and finished product warehouse is
located at the end of the system. The n products are loaded
from material house and processed by the system. After p
manufacturing processes, products arrive at finished prod-
Process3
Process2
Proces1
JOB2
JOB2
JOB2
L
t i i t i i t i
L L d K
, , ,
oo + =
Process3
Process2
Proces1 JOB1
JOB1
JOB1 JOB2
JOB2
JOB2
Waiting Time
L
time
time
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uct warehouse as completed products.
The inventory of finished goods is checked every day.
The firm places the order when the inventory is below the
reorder point.
As figure 6, we assume that the process is hybrid flow
shop which is combined a flow shop and a parallel machine.
Or, as figure 7, a completely job shop is treated in which all
routines differ from each other.
If every part route is ordered in a consistent unidirec-
tional manner, the shop is considered a pure flow shop. On
the other hand, if every item in the shop is ordered in a non-
unidirectional fashion, the shop is considered a pure job
shop. If its different from each process of 3 of hybrid flow
shop (figure 6) and production sequence by a processing
target thing, or its shared with two ways by a job
shop(figure 7) and an experiment is made.
Specifically, from the production lead time L by the
above-mentioned system its possible to find an appropriate
reorder point according to the congestion situation of the
production place by production reorder point K(1).
If there is order over two products at the same time, it
is decided about the order of priority by dispatching rules.
(LPT : Longest processing time) (K. Yosimoto et al. 1999)

m : number of machine
n : number of product
p : number of process


Machine
1
Machine
4
Machine
7
Machine
2
Machine
5
Machine
8
Machine
3
Machine
6
Machine
9
m
a
t
e
r
i
a
l
p
r
o
d
u
c
t
Process
1
Process
2
Process
3

Figure 6: Hybrid flow shop

m
a
t
e
r
i
a
l
Machine
Machine
Machine
Process 1
Process 2
Process3
p
r
o
d
u
c
t

Our evaluation criteria are frequency of stock out and
inventory quantity as figure 8.
Long
Short
I
n
v
e
n
t
o
r
y

l
e
v
e
l
Frequency of stock out

Figure 8 : Evaluation criteria
4. THE NUMERICAL EXPERIMENT

4.1 Parameter settings

The best way of presenting the approach is through
comparison with the conventional RPS model(1)(2). Ex-
perimental input information fixes machining time, lot size,
beginning inventory and customer demands like table 1,
and handles 5 kinds of product, simulates for 1000 days
as table 1 and table 2. A conventional technique and pro-
posed technique was compared and checked stock and freq
uency of stock out were checked like table 4 against 9
types of the safety stock coefficient like table 4.
A conventional technique (1), (2) fixes and handles a
production lead time like table 3. But by a proposed tech-
nique, a reorder point is changing because a production
lead time is changing.
We investigate the relationship between average inven
tory and frequency of stock out for each technique.
In summary, the simulation planning pass consists of
determining order-release dates from production lead time
based on actual component and assembly lead times. Prod
uction lead time is a function of shop load, order
priority, resources schedules, part routings and constraints.
But, conventional RPS uses fixed component lead times
as table 3.

Figure 7 : Job shop


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Table 1: Input data of hybrid-flow shop












Demand quantity (normal distribution) N(120,10
2
)

Table 2: Input data of job shop

product Processing time
machining
sequence
Lot size
Initial inventory
1 7 10 18 M1M2M3 800 1000
2 2 17 12 M1M3M2 700 900
3 15 10 5 M3M1M2 600 800
4 10 7 10 M3M2M1 500 700
5 5 10 10 M2M3M1 400 600

Table 3 : Job Shop Ratio

Table 4: Safety stock coefficient


product
Processing time
Lot size
Initial inventory
1 2 3
1 30 40 72 800 1000
2 10 70 50 700 900
3 60 40 20 600 800
4 40 30 40 500 700
5 20 40 40 400 600
JSR
Product
100% 75% 50% 25% 0%
1 M1M2M3 M1M2M3 M1M2M3 M1M2M3 M1M2M3
2 M1M3M2 M1M2M3 M1M2M3 M1M2M3 M1M2M3
3 M3M1M2 M3M1M2 M1M2M3 M1M2M3 M1M2M3
4 M3M2M1 M3M2M1 M3M2M1 M1M2M3 M1M2M3
5 M2M3M1 M2M3M1 M2M3M1 M2M3M1 M1M2M3
3.090 2.576 2.326 1.960 1.645 1.282 0.842 0.524 0.253
P(%) 0.001 0.005 0.010 0.025 0.05 0.10 0.20 0.30 0.40
APIEMS2009 Dec. 14-16, Kitakyushu
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Table 5: Comparison of the proposed with conventional model















4.2 Hybrid flow shop

Result of the frequency of stock out for each safety
factor in the hybrid flow shop test is shown in table 7.And
result of the average inventory for each safety stock coeffi-
cient in the hybrid flow shop test is shown in table 7

Table 6: Frequency of stock out for each safety stock
coefficient (hybrid flow shop)

Safety
stock coef-
ficient
frequency of stock out
conventional
proposed
(1) (2)
0.253 0 88.2 18.0
0.524 0 72.8 10.6
0.842 0 69.2 9.0
1.282 0 53.6 6.4
1.645 0 40.8 3.4
1.960 0 39.6 3.6
2.326 0 29.8 4.0
2.576 0 27.0 2.2
3.090 0 19.2 1.6
average 0 47.9 6.5











Table 7 : Average inventory for each safety stock coeffi-
cient(hybrid flop shop)
Safety
stock coef-
ficient
average inventory
conventional
proposed
(1) (2)
0.253 5929.7 2512.3 2265.6
0.524 5993.9 2541.8 2297.2
0.842 6037.7 2581.0 2328.9
1.282 6105.5 2625.6 2373.4
1.645 6143.5 2663.0 2408.0
1.960 6223.7 2701.2 2447.3
2.326 6270.0 2740.8 2482.7
2.576 6307.7 2791.7 2507.4
3.090 6394.3 2824.6 2562.5
proposed modelL= variable lead time
conventional model(1)L= maximum of lead time
conventional model(2)L= expected value of lead time

Describing table 6,7 with graph, it is equal to
figure 9,10

conventional
proposed
(1) (2)
Processing time constant constant constant
Waiting time variable variable variable
Production
Lead time
constant expected value variable
Reorder point Fixed Fixed variable
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0
10
20
30
40
50
60
70
80
90
100
0.25 0.52 0.84 1.28 1.65 1.96 2.33 2.58 3.09
f
r
e
q
u
e
n
c
y

o
f

s
t
o
c
k

o
u
t
safety stock coefficient
conventional
technique (1)
conventional
technique (2)
proposed
technique .

Figure 9: Frequency of stock out for each safety stock
coefficient (hybrid flow shop)
2000
2500
3000
3500
4000
4500
5000
5500
6000
6500
7000
0.25 0.52 0.84 1.28 1.65 1.96 2.33 2.58 3.09
i
n
v
e
n
t
o
r
y

l
e
v
e
l
safety stock coefficient
conventional
technique (1)
conventional
technique (2)
proposed
technique .

Figure 10 : Average inventory for each safety stock
coefficient (hybrid flow shop)

Making graph from the relationship between inventory
and frequency of stock out for each technique, it becomes
to be like figure 11. According to figure 11, we can see
that our evaluation criteria is satisfied.

2000
2500
3000
3500
4000
4500
5000
5500
6000
6500
7000
0 20 40 60 80 100
i
n
v
e
n
t
o
r
y

l
e
v
e
l
frequencyofstockout
conventional
technique (1)
conventional
technique (2)
proposed
technique .

Figure 11 : Relationship between average inventory
and frequency of stock out for each technique. (hybrid flow
shop)
4.3 Job shop
4.3.1 Job Shop Ratio =100%

Result of the frequency of stock out for each safety
factor in the hybrid flow shop test is shown in table 8. And
result of the average inventory for each safety stock coeffi-
cient in the hybrid flow shop test is shown in table 9.
Table8 : frequency of occurrence of stock out(job shop)
Safety
stock coef-
ficient
frequency of occurrence
conventional
proposed
(1) (2)
0.253 0 143 129
0.524 0 132 120
0.842 0 104 89
1.282 0 77 71
1.645 0 70 55
1.960 0 51 45
2.326 0 37 33
2.576 0 30 28
3.090 0 27 22
Table 9: volume of average inventory (job shop)
Safety
stock coef-
ficient
volume of average inventory
conventional
proposed
(1) (2)
0.253 5213.5 3371.9 1892.7
0.524 5250.0 3391.0 1912.3
0.842 5276.4 3396.7 1926.1
1.282 5345.6 3405.2 1957.5
1.645 5380.9 3448.6 1969.3
1.960 5408.8 3446.1 1971.0
2.326 5441.8 3463.4 2009.6
2.576 5492.8 3490.6 2022.6
3.090 5528.1 3502.4 2050.9
Describing table 8, 9 with graph, it is equal to
APIEMS2009 Dec. 14-16, Kitakyushu
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figure12,13.
0
20
40
60
80
100
120
140
160
0.25 0.52 0.84 1.28 1.65 1.96 2.33 2.58 3.09
f
r
e
q
u
e
n
c
y

o
f

s
t
o
c
k

o
u
t
safety stock coefficinet
conventional
technique (1)
conventional
technique (2)
proposed
technique .

Figure 12: Frequency of stock out for each safety
stock coefficient (job shop)
1500
2000
2500
3000
3500
4000
4500
5000
5500
6000
0.25 0.52 0.84 1.28 1.65 1.96 2.33 2.58 3.09
i
n
v
e
n
t
o
r
y

l
e
v
e
l
safety stock coefficient
conventional
technique (1)
conventional
technique (2)
proposed
technique .

Figure 13: Average inventory for each safety stock
coefficient (job shop)

Making graph from the relationship between inventory
and frequency of stock out for each technique, it becomes
to be like figure 14. According to figure 14, we can see
that our evaluation criteria is satisfied.
1500
2000
2500
3000
3500
4000
4500
5000
5500
6000
0 50 100 150 200
i
n
v
e
n
t
o
r
y

l
e
v
e
l
frequency of stock out
conventional
technique(1)
conventional
technique(2)
proposed
technique

Figure 14: Relationship between average inventory
and frequency of stock out for each technique.(job shop)

4.3.1 Job Shop Ratio is variable

The shop characteristics are parameterized such that
the randomness of routines used to manufacture products,
called the job-shop ratio. Accordingly, a job shop ra-
tio(JSR) of 0% indicates that a flow shop is treated in
which all routines are identical, whereas all routines differ
from each other. The Job Shop Ratio is calculated as below
formula (4) (M. Kuroda et al. 2002).



(4)









Figure 15 : Job Shop Ratio

We graph from relationship frequency of stock out for
each job shop ratio figure 16.

0
50
100
150
200
250
300
350
400
450
100% 75% 50% 25% 0%
f
r
e
q
u
e
n
c
y
o
f

s
t
o
c
k

o
u
t
Job shop ratio
proposed
technique
conventional
technique(2)

Figure 16 : Frequency of stock out for each job shop
ratio

4.4 Analysis of the results
Production lead time of conventional technique (1) is
calculated by the maximum value of simulation for
1000days . In this case, the inventory has excess compared
with a proposed technique. Thus conventional tech-
nique(1) keeps a large inventory despite the extremely short
lead time. But, proposed technique is always depending on
100 1
|
|
|
|
.
|

\
|
=
jobs of number total
routine idential
the with jobs of number
JSR



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state of process. Accordingly we could say that the pro-
posed RPS is to help limit the inventory level by variable
lead time. On the other hand, a way using the lead time on
the basis of stock out allowable ratio (conventional tech-
nique (2)) has increased average inventory and stock out
substantially compared with the proposed technique. Con-
ventional RPS(2) takes a new approach to improve the in-
ventory problem of conventional RPS(1). Thus convention-
al RPS(2) focus on to reduce of inventory. As a result of
the above, we found out that inventory or frequency of
stock out can be improved by setting lead time appropriate
to each product based on a result of the production lead
time L scheduling. Results of the experiments show that the
proposed technique performs better than conventional tech-
nique (1)(2).
In case of a Job Shop Ratio, when the job shop ratio of
process is 100%, fixed lead times may be reasonable. On
the other hand, when the job shop ratio of process is 0%,
proposed technique showed a remarkable improvement
over conventional technique because waiting time get long-
er as we approach the job shop ratio 0%. The conventional
technique does not deal with change of production lead
time.
5. CONCLUSION
In this paper, we consider about the production lead
time by scheduling when calculating an reorder point, to
improve both the over stock level and frequency of stock
out which are a problem of conventional reorder point sys-
tem. And lead time of the proposed RPS is variable and are
based on realistic. The congestion situation of the produc-
tion process was considered and the new reorder point sys-
tem which considered the changing lead time was proposed.
And the validity of the proposed system was inspected by a
numerical experiment. Proposed RPS was fairly com-
pared with a conventional RPS. In a multi-item production,
the proposed RPS will consistently result in better overall
system performance relative to a conventional RPS. In
summary, this experimentation indicates that proposed RPS
may be a superior for a multi-item production environment.


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Yugo HIMOTO, Atsushi SAITO and Masayuki
MATSUI (2004): A case study on setting of safety stocks
in SCM/MRP : J Jpn Ind Manage Assoc 55, pp51-58

AUTHOR BIOGRAPHIES
Jeongja Jeong is a graduate student at Sophia University
in the Department of Information. She received her B.S in
Industrial engineering from Kangwon University, Korea.
Her email address is <jajaja@sophia.ac.jp>


Takashi Irohara is an Associate Professor at Sophia Uni-
versity in the Department of Information and Communica-
tion Sciences. He received his B.S, M.S., and Ph.D. in In-
dustrial and Management Systems Engineering from Wa-
seda University, Tokyo. His research interests include facil-
ity layout and material handling, manufacturing scheduling
and logistics optimization. His papers have been published
in Computers and Industrial Engineering, Journal of Japan
Industrial Management Associations, Transactions of the
Japan Society of Mechanical Engineers, Journal of the So-
ciety of Plant Engineers Japan, Journal of Japan Society of
Logistics Systems and others. He is a member of the Japan
Industrial Engineering Association, the Japan Society of
Mechanical Engineers, the Operations Research Society of
Japan and the Scheduling Society of Japan. His email ad-
dress is <irohara@sophia.ac.jp>


APIEMS2009 Dec. 14-16, Kitakyushu
1779