We consider a dynamic network flow model for the control problem of a production-distribution system with periodic demand in the presence of storage and transportation capacity constraints. Unlike most papers dealing with control problems of dynamic networks, we derive a control strategy in feedback form. It is optimal in the sense that it involves, for any initial time, the set of all the initial states for which there exists a control strategy allowing the network variables (flows, storage levels) to remain in their constraint domain for all future times. The evaluation of such a strategy requires the previous computation of these maximal sets. We show that, due to the particular structure of the system, they are submodular polyhedra; in particular, they are finitely represented and the representation complexity is a priori known. Moreover, the evaluation of this sequence, even for the infinite horizon problem, can be performed in a finite number of steps that has a known upper bound depending on the dimension of the problem only. As a consequence of these results, the optimal strategy requires, at each step, to solve a submodular flow problem. The finite horizon problem is solved by the proposed method as a particular case. © 1996 John Wiley & Sons, Inc.