A Distribution-Free Playbook for Dual Sourcing In the paper “Dual Sourcing Made Easy: Distributionally Robust Optimization of an Inventory System Under Independent Demand,” the authors study a common dual-sourcing dilemma: a low-cost supplier with a long lead time versus a faster, more expensive backup. Rather than committing to a parametric demand model, they propose a distributionally robust formulation that relies only on the demand mean and variance, while leveraging independence across periods. This yields a simple, closed-form way to set a tailored base–surge (TBS) policy: regular orders cover the predictable component of demand, and emergency orders buffer the remaining uncertainty, with inventory targets reflecting lead-time differences. The resulting policy is lightweight to calibrate, easy to deploy, and straightforward to stress test. In a field application using data from a multinational food manufacturer, the robust TBS settings improve service performance and reduce stockouts relative to the firm’s current rule and standard benchmarks, without sacrificing cost efficiency under volatility.
Jiang et al. (Thu,) studied this question.