Time interval

Time interval inventory models are inventory management models which relay on periodical inventory ordering and use the passage of time as a trigger to review the amount of inventory on hold and to place inventory orders. This model doesn’t need constant tracking and inventory levels are only reviewed at the set time interval; daily, weekly, fortnightly, monthly or even yearly.It is less complex than the EOQ model.

It is a model best left for items which are slow to move or have very predictable demand. The use of buffer or safety stock is usually recommended to absorb any demand anomalies which may present themselves from time to time.Inventory holdings including safety stock have the risk of becoming obsolete if there is no stock rotation. The One bin system is an example of a time interval inventory management model.

The time interval model relies on the average daily demand plus the lead time for a new order to arrive and the time interval period in order to establish the order quantity. The formula for the order quantity is:

Q = d(T+L) -q

Where d: is daily demand of item or product
Where T: is the time interval between inventory order placement
Where d: is the average daily demand for the item or product
Where q: is current inventory in stock

It is also important to take into account inventory already on order if the order time interval is shorter than the order lead time.

The inventory buffer or safety stock if required can be determined as a set percentage of the order size or by assuming demand is normally distributed and using the z probability statistic as the number of standard deviations times the standard deviation of demand for the item. The single order inventory model uses this probability method.