Suppose demand for an item in inventory at a warehouse behaves as a Poisson process at rate , i.e., arriving customers are via a rate Poisson process, where each customer demands one unit of the inventory item. Whenever the inventory hits 0, an order of constant size S units is placed with the factory. Delivery time (of the entire order) from the factory to the warehouse is exponential with mean 1/. During that time, demand is lost at a cost of c/unit. The inventory holding cost is h/unit/unit time, based on the average amount of inventory held. (These are the only relevant costs.)