Effects of Inventory Miscount and Non-Inclusion of Lead Time Variability on Inventory System Performance

This paper addresses concerns of die management of a service parts organization for the realized service level [Pcirc], measuring parts availability (from shelf), being much lower than die prescribed service level P. The diagnostic study suggested the potential causes were die inventory miscount and die non-inclusion of lead time variability in computing reorder points. Quantitative measures for the degradation in the service level are derived as a function of the level of inventory miscount and the lead time variability. The prevailing levels of inventory miscount errors and lead time variability are estimated for a service parts organization with 45,000 parts and annual sales volume of $65 million. The composite degradation in service level P∘ is computed when these causes are operating individually and jointly.