
Inventory management: (s,q) inventory policy with normaldistributed period demand
A (s,q) inventory policy for a product with normaldistributed demand per
period and a fixed lead time is computed. In the standard version, continuous
review is assumed. In this case, an iterative algorithm for finding the optimal
values of s and q is applied. Alternatively, reviewing the inventory position
at the end of each period (e.g. a day) while maintaining a fixedquantity q
[opposite to the (s,S) policy] is assumed. In this case the expectation and
variance of the undershoot variable is computed and integrated into the computation
of s.
Symbols:
E{D} 
expected demand per period 
E{L} 
lead time 
E{Y} 
expected demand during lead time 
V{Y} 
variance of the demand during lead time 
E{Y*} 
expected value of the sum of the demand during lead time and the undershoot 
V{Y*} 
variance of the sum of the demand during lead time and the undershoot 
E{U} 
expected undershoot 
V{U} 
variance of the undershoot 
P{.} 
probability 
s 
reorder point 
q 
order size 
Assumptions:
 normaldistributed demand
 ßservice level
 backorders, no lost sales
After computation of the optimal values of s and q these values are transfered
to the simulation module.
Literature:
 Tempelmeier (2006)
