Analytic approximations for (s,S) inventory policy operating characteristics

The operating characteristics of (s,S) inventory systems are often difficult to compute, making systems analysis a tedious and often expensive undertaking. Approximate expressions for operating characteristics are presented with a view towards simplified analysis of systems behavior. The operating characteristics under consideration are the expected values of: total cost per period, period-end inventory, period-end stockout quantity, replenishment cost per period, and backlog frequency. The approximations are obtained by a two step procedure. First, exact expressions for the operating characteristics are approximated by simplified functions. Then the approximations are used to design regression models which are fitted to the operating characteristics of a large number of inventory items with diverse parameter settings. Accuracy to within a few percent of actual values is typical for most of the approximations.