Letter to the Editor—A Comparison of (t, Z) and (z, Z) Policies

Two widely used inventory policies, the (t, Z) policy and the (z, Z) policy, are compared in this communication. In the (t, Z) policy orders for replenishments are placed at regular intervals t, whereas in the (z, Z) policy the orders are placed only when stocks on hand and on order are equal to or below the level z. In both policies the amounts ordered raise stocks to the level Z. It is shown that in systems in which various items may be separated and analyzed independently the (z, Z) policy is the better policy. However, in other systems the (t, Z) policy may be the optimal policy. This may occur, for example, in systems in which replenishment costs are common to several items.