A NEW APPROACH TO (S, S) INVENTORY SYSTEMS

In this paper, we consider period review (s, S) inventory systems with independent and identically distributed continuous demands and full b acklogging. Using an approach recently proposed by Gong and Hu (1992), we derive an infinite system of linear equations for all moments of i nventory level. Based on this infinite system, we develop two algorith ms to calculate the moments of the inventory level. In the first one, we solve a finite system of linear equations whose solution converges to the moments as its dimension goes to infinity. In the second one, w e in fact obtain the power series of the moments with respect to s and S. Both algorithms are based on some very simple recursive procedures . To show their efficiency and speed, we provide some numerical exampl es for the first algorithm.