Determination of the levels s and S by dynamic programming

Abstract

The levels s and S in a (s, S) system can be established relatively simply for two extreme cases, namely:

• 1 s = S, the system of fixed-interval replenishment;

• 2 (S — s) ≫ d, or in other words, where the need to place an order only arises infrequently (less than once per 5 periods).

In other cases dynamic programming (DP) may provide a solution.