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Are Base-Stock Policies Optimal in Inventory Problems with Multiple Delivery Modes?

School of Management, University of Texas at Dallas, Richardson, Texas 75083-0688
School of Management, University of Texas at Dallas, Richardson, Texas 75083-0688
Department of Systems Engineering and Engineering Management, Chinese University of Hong Kong, Shatin, N. T., Hong Kong, China
Academy of Mathematics and Systems Sciences, Academia Sinica, Beijing, 100080, China
qxf011100{at}utdallas.edu
sethi{at}utdallas.edu
yan{at}se.cuhk.edu.hk
hanqin{at}amt.ac.cn

We present a periodic review inventory model with multiple delivery modes. While base-stock policies are optimal for one or two consecutive delivery modes, they are not so otherwise. For multiple consecutive delivery modes, we show that only the fastest two modes have optimal base stocks, and provide a simple counterexample to show that the remaining ones do not. We investigate why the base-stock policy is or is not optimal in different situations. This note is an abridged version of Feng et al. (2006).

Subject classifications: inventory/production: uncertainty, multiple delivery modes, base-stock policies.
History: Received February 2004; revision received March 2005; accepted March 2005.

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