The periodic review inventory model based on two supply modes

A periodic review inventory system is described in which there are two modes of resupply, namely a regular mode and an emergency mode. The emergency mode is modelled as a higher cost per unit and a higher set-up cost. Then the order may be placed using either supply mode, depending on the inventory position H at each review epoch. A (T,R,I1,I2) policy is used. There exist two indifference inventory levels I1 and I2 and I1 < I2 so that (i) if H < I1 or H > I2, the regular supply mode is used and (ii) if I1 ⩽ H ⩽ I2, the emergency supply mode is used.