Planning stability under (s, S) inventory control rules

The problem of planning instablity caused by new and actualized data in material coordination systems with periodic review and replanning activities has been discussed from several viewpoints in literature and it is of great practical importance. The application of a rolling horizon planning framework in forecast-dependent inventory control leads to nervousness in the planning system caused by different order release decisions in successive planning cycles. In this paper a setup-oriented planning stability concerning deviations of planned orders in all periods of a given stability horizon in a single-stage inventory system with arbitrary stochastic demand is analyzed. The influence of an (s, S) control rule on planning stability is derived analytically. It is shown that the reorder point s does not affect stability whereas the minimum reorder quantity S – s has a considerable impact. Especially, it is analyzed how planning stability depends on the length of the stability horizon, on period-specific weights, and on the accuracy of demand forecasts.