Inventory Management of Slow-Moving Parts

We present in this paper a simple, fast, and accurate method for determining optimal stock levels for slow-moving parts which we worked out in March 1955. Independently of our work, Whitin and Youngs studied the same problem and published their results in a recent paper. “A Method for Calculating Optimal Inventory Levels and Delivery Time” in the Naval Research Logistics Quarterly, September 1955. While both studies are basically the same, our solution seems to be the more practical. Essential differences are the use of a second criterion (not so complete as the “costs,” but more easily accepted by managers)—the customer's satisfaction, and the graphical presentation, which allows the immediate determination of the optimal level. For practical reasons we assumed that the distribution of demand is Poisson, conceptually the distribution may be arbitrary. The method is restricted to slow-moving, non-seasonal parts with fairly long replenishment periods.