Computing the optimal policy for capacitated inventory models

We consider an infinite-horizon inventory model with finite production capacity and stochastic demands. Federgruen and Zipkin [2][3] showed that a base-stock policy is optimal; however, they did not provide an algorithm for the computation of the optimal policy or the cost. We provide, for the average cost criteria, an algorithm to compute the critical number and the associated cost. Our approach uses results from the theory of storage processes and multi-stage uncapacitated systems