Application of perturbation analysis to (s,S) inventory systems

M.C. Fu (1990) used perturbation analysis to derive sample path derivatives of (s,S) inventory systems. It is noted that his results require the distribution of the aggregated demand during each review period. In the present work, the authors extend his results to (s,S) systems where the demand has an associated renewal arrival process. They derive a methodology to determine sample path derivatives of the average cost per period with respect to S and s. This methodology uses the distribution of individual demands rather than the aggregated demand. Preliminary results from simulation experiments indicate that the estimators considered are unbiased and have very low variance.<
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