(s, S) Inventory Policy

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(s, S) Inventory Policy
sanjita jaipuria, Professor, India

The (s, S) inventory policy works as follows: if the inventory position (outstanding orders + on-hand inventory - backorders) falls to or below the reorder point (s), then an order is placed so as to increase the inventory position to the target inventory level (S).
In such (s, S) inventory policy, how to decide the value for S (target inventory) for a stochastic demand environment? Because according to the literature in (s, S) policy, when current inventory position(i) is less than or equals the reorder point(s), an order is placed for the quantity q = s - i .
So how to set the target inventory? Is there any formula to calculate this or it is based on experience of executive?

How do Increase a Profit Margin Adopting (s,S) Strategy
Benjamin K.Doh, Interim Manager, Ghana
Hello Sanjita, I appreciate your post which has been really helpful to me considering my current position in Office, but my question is: How do you increase profitability of an organisation adopting a strategy of (s,S) Inventory Policy?
Thank you beforehand for your answer...



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