In a periodic-review inventory system, the order-up-to level S is used to cover demand during which period?

• A. S equals demand during the lead time plus safety stock
• B. S equals d × (L + P) + SS
• C. S equals d × L
• D. S equals P × SS

Answer: (B)

In periodic-review systems, you place an order at fixed intervals P, and the items take L time to arrive (lead time). To avoid stockouts, you set the order-up-to level to cover all demand that can occur from the moment you place the order until the next order arrives. That protection period is L + P. If the average demand per period is d, the expected demand over this window is d × (L + P). Since demand can vary, you add safety stock SS. So the order-up-to level is S = d × (L + P) + SS. This ensures enough inventory to cover both the lead time and the next review period, with a buffer for variability. The other options miss this protection period aspect or mix up the concept (for example, only lead time demand, or a nonsensical product of P and SS).