AbstractA well-known replenishment policy for an inventory subject to probabilistic demand gives rise to the problem of determining an order quantity and a reorder level which minimize the average cost of keeping inventory. If the problem can be expressed in terms of a simple approximative model which includes a restriction on back-orders and represents demand in the replenishment lead time as normally distributed, it is possible to construct a "set-square index" nomogram which accomplishes a major part of the necessary computations. The procedure for using the nomogram and the principles of its construction are described.