Inventory Policies

Key Aspects in Inventory Management

• Review period
• Inventory Position
• Order Point
Four Key Policies
Continuous (Perpetual) Review Policies:

(s, S)- Small s denotes re-order point and Large S is the Order
up to Level
(s,Q)- Small s denotes re-order point and Q is the Economic
Order Quantity

Periodic Review Policies:

(R, S)-R denotes review period and Large S is the Order up to

Level
(R, s, S)-R denotes review period, Small s denotes re-order
point and Large S is the Order up to Level
Continuous Review Policy

The Policy in (s,S)

policy is:

Order up to a level S,
every time your
inventory position
drops below s (Reorder
Point).
Continuous Review Policy

The Policy in (s,Q) policy is:

Order your Economic Order

Quantity Q, every time your
inventory position drops s or
below s (Reorder Point). It is
called a two bin system as
you have two Inventory
Bins: One is your Cycle
Inventory and another bin
consists of Demand during
lead time and Safety Stock.
Periodic Review Policy

The Policy in (R,S) policy is:

Order up to a level S, every

R time periods (R is the
Review Period).
Periodic Review Policy

The Policy in (R,s,S) policy

is:

Order up to a level S, every

R time periods (R is the
Review Period) if Inventory
Position is less than or equal
to s (Reorder Point).