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Continuous review, order-up-to policy (Min/Max)


The shorthand notation for this policy is (s, S), sometimes called “little s, big S” where s is the reorder point and S is the order-up-to level. This policy is more commonly called (Min, Max).


When to order: Orders are placed as soon as the inventory drops to or below the Min. As with (R, Q), the inventory level is supposedly monitored constantly, but in practice it is usually checked at the end of each workday.


How much to order: The order size varies. It equals the gap between the Max and the current inventory at the moment that the Min is reached or breached.


Comment: (Min, Max) is even more responsive than (R, Q) because it adjusts the order size to take account of how much the inventory has fallen below the Min. When demand is either zero or one units, a common variation sets Min = Max -1; this is called the “base stock policy.”