The two-echelon distribution system containing one single distribution center (DC) and N stores is considered.The customer demand at each store is assumed random and follows a Poisson distribution.When a stockout occurs,customers are willing to wait for their order to be filled with a known probability for a given item.The DC and stores are assumed to perform periodic review and order strategies,and the replenishment lead times equal to zero.The unit holding costs at the store level and at the DC are different.Our object is to minimize the total cost in the supply chain under the restriction of given customer service level.Our formulation is an exact calculation of inventory cost to get optimum order policies.An example is given out whose optimum solution can be obtained easily by using spreadsheet.