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An Efficient Algorithm for Computing Optimal ( s , S ) Policies

1984; Institute for Operations Research and the Management Sciences; Volume: 32; Issue: 6 Linguagem: Inglês

10.1287/opre.32.6.1268

1526-5463

Awi Federgruen, Paul Zipkin,

Simulation Techniques and Applications

This paper presents an algorithm to compute an optimal (s, S) policy under standard assumptions (stationary data, well-behaved one-period costs, discrete demand, full backlogging, and the average-cost criterion). The method is iterative, starting with an arbitrary, given (s, S) policy and converging to an optimal policy in a finite number of iterations. Any of the available approximations can thus be used as an initial solution. Each iteration requires only modest computations. Also, a lower bound on the true optimal cost can be computed and used in a termination test. Empirical testing suggests very fast convergence.