Near-optimal (r,Q) policies for a two-stage serial inventory system with Poisson demand

► Model a two-stage serial inventory system with economies of scale in both stages. ► Stage 1 faces Poisson demand and there is a fixed setup cost for each stage. ► Important properties are derived for an approximation problem under (r, Q) policy. ► A simple heuristic algorithm is designed for the original problem. ► Numerical examples show the effectiveness of the algorithm.