Montgomery et al. proposed an (R, T) type of periodic review inventory model in which the lost sales rate is given. The purpose of this paper is to investigate the impact in this heuristic periodic review inventory model with increasing investment to reduce the lost sales rate, where the review period and lost sales rate are decision variables. In this paper, the protection interval demand is assumed to be normal distributed, and two commonly used investment cost functional forms, logarithmic and power, are employed for lost sales rate reduction. A procedure of finding the optimal investment decision is developed, and three numerical examples are given to illustrate the results.
