This study is concerned with minimizing the total discounted cost of o
perating an inventory system and providing the warehouse space necessa
ry to accommodate the replenishment lots, under the assumption of cons
tant product demand. The use of an approximation objective function fo
r the single-item case allows the optimal warehouse size as well as th
e ratio of relevant investment costs to relevant inventory costs to be
written in closed-form. Based upon the value of this ratio, circumsta
nces are identified under which an integrated approach is justified, a
nd others under which the inventory policy and storage capacity can be
determined sequentially. The multi-item version of the problem under
study is solved by the Lagrangian multiplier method, given that no coo
rdination takes place between the items. Finding the optimal Lagrange
multiplier can be accomplished efficiently by the Newton-Raphson metho
d.