Computation of (S, s) Ordering Policy Parameters

In this paper a periodic review stock system using the so-called (S, s) ordering policy is considered. New and more accurate approximations are found for calculating the optimal values of the reorder point s and the minimum order quantity Δ = S − s. When demands are normally distributed it is shown that the six cost and distribution parameters associated with these approximations can be combined into two effective parameters. This facilitates the derivation of two graphs which can be used with some relatively simple computational procedures to determine approximate optimal values for the reorder point s and minimum order quantity Δ.