Inventory Policy for High Backorder Items,

In this study the item-by-item performance of the Standard Base Supply System (SBSS) is compared with the results of an aggregate model that minimizes backorders. We found that a small group of relatively inexpensive items generate nearly 90% of the units backordered in the SBSS in a year. By adding a lot size to the reorder point for those high backorder items, we can significantly reduce the number of units backordered. In this study we show how to identify these items, the theory behind the proposed inventory policy change, and the stock fund impact of implementing the policy change.