Understanding the (S, s-1) Inventory Policy

Background

In several articles distributed across different SCM Focus sites, the (S,s-1) inventory policy is discussed. For this reason, it made sense to create an article which explains what it does. The following was written by Wayne Fu.

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In Muckstadt’s book, section 1.1.2, it explains briefly about the (s,S) policy.

  1. s is normally the reorder point
  2. S is the order up to level

When inventory position (which is on hand plus on-order minus backorder) falls to or below s, it triggers an order to raise the inventory position to S.

And (S,s-1) is just a specialized form of (s,S).  Basically it is s-1 only. In section 1.2, Muckstadt states the fundamental assumption of his model. He assumes the costs of parts are high enough to be managed by (S, s-1) policy. (S,s-1) is an ordering policy basically says if the inventory level is one below (S-1), place an order to bring inventory level to S.

It is very commonly used in long lead-time environments such as aerospace.

Author Thanks
I wanted to thank Wayne Fu for his contribution. I was not aware of many of the details which are described above, and I think this should be of interest to anyone who practices in this field.
Author Profile
Wayne Fu is a Senior Product Management in Servigistics.With operation management background, Wayne has worked in service part planning domain for more than a decade. In Servigistics, he led the research and development of various areas like install-base (provisioning) forecasting, inventory optimization and distribution planning. Currently, he is focusing on the effectiveness of forecast techniques in Last Time Buy.
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One thought on “Understanding the (S, s-1) Inventory Policy

  1. Pingback: Croston’s vs. Smoothing

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