This paper examines a two-facility inventory problem where one facility is the sole supplier of the other. The system operates in a stochastic environment and employs a continuous review (Q, r) inventory policy. The system must service expected demand for some product over an infinite time horizon and no backlogging of excess demand is permitted. The objective is to minimize expected total system cost per unit time over the infinite time horizon. Optimal and near optimal solutions are obtained with computational results reported for the case of gamma distributed (integer modulus) demand over lead time.