The control problem of multi-echelon production-inventory system under fluctuating raw material prices is
studies. All the raw material price, processing cost of semi-finished product, production cost of finished product,
inventory cost rate and finished product demand rate fluctuate over time. Therefore the necessary and sufficient conditions for the optimal procurement, processing and production decision are analyzed, and the optimal inventory policy under some assumption conditions are obtained to be JIT procurement, processing, and production policy, or executing the procurement, processing, and production activities at full speed at the very beginning of the planning horizon called the Bang-Bang policy.