【Abstract】We study a continuous-review, infinite-horizon inventory system with dual supply/delivery modes. The expedited mode provides a shorter lead time than the regular mode. Using each mode incurs a fixed order cost. Demand arrival follows a compound Poisson process and is filled by on-hand stock. Unsatisfied demand is backlogged and incurs shortage cost while additional inventory is stocked and incurs holding cost. For such a system, the optimal inventory policy that minimizes the expected long-run average cost is unknown and is expected to be very complicated. We thus propose a class of simple policies called dual (r,nQ) policies{when ordering from each mode, the system follows an (r,nQ)-type of policy with mode-specific reorder point and batch size. This policy is easy to implement but its evaluation is non-trivial due to the difference in lead times and complex system dynamics. We provide an exact procedure to evaluate the performance of the policy. In particular, we first analyze the steady state probability distribution of the inventory position, which is found to be no longer uniform in general as in the classical (r,nQ) inventory system (only one delivery mode is available). Then we provide a recursive procedure to solve the steady state probability of the inventory level, which is essential for calculating the inventory cost. Because identifying the optimal policy parameters is very challenging, two simple heuristic methods for solving the policy parameters are provided. Furthermore, for a special case where a base-stock policy is adopted for the regular mode, we apply normal approximation and develop an efficient approach to look for the near-optimal policy parameters by deriving closed-form solution bounds. Our numerical study shows that the approach is very effective. This is joint work with Chaolin Yang.