Sole versus dual sourcing in a continuous-review inventory system with lost sales

While existing cost analysis studies on the problem of sole versus dual sourcing only deal with the backorder case, we present an exact treatment of this problem in the context of a lost sales inventory system with compound Poisson demand and exponentially distributed lead times. The stationary distribution of the inventory level (stock on hand) and the corresponding cost functions with/without a service level constraint are derived using a level-crossing methodology, and numerical results are presented.