Tailored Base-Surge Policies in Dual-Sourcing Inventory Systems with Demand Learning

Dual-Sourcing Inventory Management Under Incomplete Information The class of dual-sourcing problems is one of the most fundamental challenges in inventory and supply chain management and is a common practice in global supply chain management. Under a dual-sourcing strategy, a firm procures items from a regular source with lower cost and longer lead time and an expedited source with higher cost and shorter lead time. We focus on Tailored Base-Surge (TBS) policies, where a constant order is placed with the regular source each period, and the expedited source follows an order-up-to rule. Although existing literature assumes that stochastic demand processes are known inputs to optimization models, decision-makers often lack this information in practice and must learn it in real time to maximize expected revenue. In “Tailored Base-Surge Policies in Dual-Sourcing Inventory Systems with Demand Learning”, B. Chen and C. Shi develop online learning algorithms for finding the optimal TBS policy, demonstrating strong theoretical and numerical performance.