| Article ID: | iaor20121915 |
| Volume: | 40 |
| Issue: | 2 |
| Start Page Number: | 114 |
| End Page Number: | 122 |
| Publication Date: | Mar 2012 |
| Journal: | Operations Research Letters |
| Authors: | Qi Lian, Zeynep Sargut F |
| Keywords: | inventory, combinatorial optimization |
We study a continuous‐review inventory problem of a two‐echelon supply chain with random disruptions, identify properties of the optimal cost function, compare the optimal order quantity with the classical economic order quantity, analyze the sensitivity of the optimal solution, and explore the conditions under which zero‐inventory ordering policy is preferred.