A comparison of the constant-order and dual-index policy for dual sourcing

We analyze a periodic-review, single-stage stochastic demand inventory system with backorders and two supply options, a regular and a more expensive expedited one. Since the optimal policy for such a problem is generally unknown, we restrict our analysis to two simpler policies: the constant-order and the dual-index policy. We numerically explore the relative cost performance of both policies in a detailed simulation study and find that for long regular lead times the much simpler and from a practical point of view more attractive constant-order policy delivers very good or even better results than the dualindex one, which in previous research has been found to perform closely to the optimal policy