Are Base-Stock Policies Optimal in Inventory Problems with Multiple Delivery Modes?
OPERATIONS RESEARCH, Vol. 54, No. 4, pp. 801-807, July-August 2006
12 Pages Posted: 5 Feb 2008 Last revised: 31 Aug 2009
Date Written: January 1, 2004
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 Q. Feng, S. P. Sethi, H. Yan and H. Zhang, Optimality and nonoptimality of the base-stock policy in inventory problems with multiple delivery modes, Journal of Industrial and Management Optimization, Vol. 2, No. 1, 2006, pp. 19-42.
Keywords: inventory models, inventory/production, uncertainty, multiple delivery modes, base-stock policies,dynamic programming
JEL Classification: C61,M11
Suggested Citation: Suggested Citation