Inventory Policy
The size of the safety stock depends on the type of inventory policy that is in effect. An inventory node is supplied from a "source" which fulfills orders for the considered product after a certain replenishment lead time. In a "periodic review" inventory policy the inventory level is checked periodically (such as once a month) and an order is placed at that time if necessary; in this case the risk period is equal to the time until the next review plus the replenishment lead time. On the other hand, if the inventory policy is a "continuous review" policy (such as an Order point-Order Quantity policy or an Order Point-Order Up To policy) the inventory level is being check continuously and orders can be placed immediately, so the risk period is just the replenishment lead time. Therefore "continuous review" inventory policies can make do with a smaller safety stock.
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