Safety stocks and the order quantity that leads to the minimal stock (Q1820665)

In this sequel to earlier papers, attention has been paid to the out of stock probability \(\alpha\). For practical applications a flow diagram is given as a resumé of the different approaches that cover the whole range \(n=(\mu /\sigma)^ 2\geq 0.25\), where \(\mu\) and \(\sigma\) are the expected value and the standard deviation of the demand in the lead time. As the physical stock is a convex function of the order quantity Q, the value of Q is determined by which the stock is minimal. A simple approximation leads to an optimal Q that is only a function of n and \(\sigma\). This theoretical approach is very practical, because 'high inventories' is a main problem in industry.