Optimality Gap of Tailored Base-Surge Policies Decays Exponentially in Regular-Source Lead Times for Dual-Sourcing Models
This paper resolves an open problem posed in the literature by proving that, in dual-sourcing inventory systems, the optimality gap of tailored base-surge (TBS) policies decays exponentially with the regular source lead time, with the express-source lead time fixed. In contrast to the existing approach, which relies on conditional Jensen inequalities and a vanishing-discount argument … Read more