FIXED-TIME PERIOD OR FIXED-ORDER INTERVAL MODEL

 When to order?
 Order interval coincides with review period;
 Order is placed when the review period (T) arrives.

 How much to order?

 q = variable; the order quantity varies each time an order is placed.

Order quantity = expected demand during the order interval and lead time +
safety stock – inventory status

q  d T  L  SS  I

SS  z d T  L

q  d T  L   z d T  L  I

Where:

q = number of units to be ordered for the next period, units

d = average daily demand, units/day
T = order interval or review period, days
L = lead time, days
z = number of standard deviations corresponding to a desired service level
 d = standard deviation of daily demand, units
I = inventory status, units
I  on hand  on order  backorder

Desired service level = the probability that the item is available; i.e., not
stockout, when needed.

e.g., A desired service level of, say, 95%, means that the inventory
manager desires that the inventory item is available 95% of the time that it
is demanded, which is equivalent to a 5% chance of stockout.