A solution procedure for (Q, r) inventory policies

Demand items are classified as slow moving or fast moving. Basically, slow moving items will be modelled according to the Poisson or Laplace distributions. Peterson and Silver indicate that for some slow moving items, Laplace distributions will be exclusively used to model lead time demand. This article will focus on slow moving items by assuming that the lead time demand is Laplace distributed. At first, this article shows that the total relevant cost function is convex. Then, a solution procedure is developed to determine the optimal reorder point and the optimal order quantity. Numerical examples are also given to illustrate the solution procedure.