Sensitivity analysis of an (s,S) inventory model

We provide a sensitivity analysis of the standard periodic-review (s,S) inventory model. Under the assumption that the demand in each period is exponentially distributed, we show that the average cost of the (s,S) model is quite insensitive to the choice of D =S – s. Therefore we have extended similar sensitivity results for the (r,Q) model and the economic order quantity model to a special (s,S) model. Our sensitivity result also holds for the continuous-time (s,S) model if the demand is compound Poisson with exponential demand sizes.