Sample path derivatives for (s,S) inventory systems

Sample path derivatives for (s,S) inventory systems

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Article ID: iaor199532
Country: United States
Volume: 42
Issue: 2
Start Page Number: 351
End Page Number: 364
Publication Date: Mar 1994
Journal: Operations Research
Authors:
Keywords: simulation: applications
Abstract:

For (s,S) inventory systems, the paper derives sample path derivatives of performance measures with respect to the two parameters s and S. These derivatives yield derivative estimators which can be estimated from a single sample path or simulation of the inventory system, in some cases not even requiring actual knowledge of the underlying demand distribution. Such derivative estimates would be useful in sensitivity analysis or in gradient-based optimization techniques. The paper considers the nondiscounted periodic review system with general independent and identically distributed continuous demands, full backlogging, and general holding and shortage costs. For the infinite horizon model, consistency proofs are given for some special cases, although it argues why the estimators should be correct for the more general case.

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