A Revision of the Power Approximation for Computing (s, S) Policies

A revision of the Power Approximation for computing (s, S) inventory policies is presented. The revision incorporates modifications which (1) ensure homgeneity in the units chosen to measure demand and (2) ensure the proper limiting behavior of S − s when the variance of demand is extremely small. Computational experience shows that the revision has operating characteristics that are typically within a few percent of optimal, which is nearly as accurate as the original Power Approximation.