January  2006, 2(1): 19-42. doi: 10.3934/jimo.2006.2.19

Optimality and nonoptimality of the base-stock policy in inventory problems with multiple delivery modes

1. 

School of Management, The University of Texas at Dallas, Richardson, TX, 75083-0688, United States

2. 

Dept. of Systems Engineering and Engineering Management, The Chinese University of Hong Kong, Shatin, N.T. Hong Kong

3. 

Institute of Applied Mathematics, Academy of Mathematics and Systems Science, Academia Sinica, Beijing, 100080

Received  May 2005 Revised  October 2005 Published  January 2006

We present a periodic review inventory model with multiple delivery modes. We generalize the notion of the base-stock policy for inventory systems with multiple delivery modes. While base-stock policies are optimal for one or two consecutive delivery modes, it is not so otherwise. For multiple consecutive delivery modes, we show that only the fastest two modes have optimal base stocks, and provide simple counterexamples to show that the remaining ones do not in general. We investigate why the base-stock policy is not optimal through detailed analyses of two numerical examples.
Citation: Qi Feng, Suresh P. Sethi, Houmin Yan, Hanqin Zhang. Optimality and nonoptimality of the base-stock policy in inventory problems with multiple delivery modes. Journal of Industrial & Management Optimization, 2006, 2 (1) : 19-42. doi: 10.3934/jimo.2006.2.19
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