Periodic-Review Inventory Model with Three Consecutive Delivery Modes and Forecast Updates

Abstract:  This paper is concerned with a periodic-review inventory system with three consecutive delivery modes (fast, medium, and slow) and demand forecast updates.  At the beginning of each period, the inventory level and demand information are updated and decisions on how much to order using each of the three delivery modes are made.  It is shown that there is a base-stock policy for fast and medium modes which is optimal.  Furthermore, the optimal policy for the slow mode may not be a base-stock policy in general.