I have been asked to calculate cycle and safety stock levels for one of our business units. I have very little/no knowledge on the subject of inventory theory so would like to ask what a reasonable approach to this problem might be:
- 5 years daily demand data
- 5 years daily inventory data
- 1.5 days lead time from facility to storage
Data looks to be gamma distributed, which I can test:
I would be extremely grateful if someone could clarify the steps necessary to calculate the above? my thoughts on an approach:
Aggregate data to monthly. Note: both series appear to be stationary - so whilst we might lose some variance information, this looks to be a reasonable step.
Compute the parameters of a lognormal/gamma dist given the datas
Calculate cycle and safety stock levels based on this or similar theory with some reasonable assumptions.
All help very gratefully received.