Title :
Production and Inventory Rationing in a Make-to-Stock System With a Failure-Prone Machine and Lost Sales
Author :
Cheng, T.C.E. ; Gao, Chunyan ; Shen, Houcai
Author_Institution :
Dept. of Logistics & Maritime Studies, Hong Kong Polytech. Univ., Kowloon, China
fDate :
5/1/2011 12:00:00 AM
Abstract :
We consider production and inventory rationing of a product to fulfill multiple demand classes in a make-to-stock production system with a failure-prone machine. Demand that cannot be satisfied immediately is lost and incurs a lost sales cost, which differs from class to class. We find that the optimal control policies under both the expected total discounted cost criterion and the average cost criterion have similar structural properties. Specifically, the optimal production policy is the base-stock policy and the optimal inventory allocation policy is the threshold control policy with machine-state-dependent threshold levels. Finally, we provide numerical examples to show the importance of taking machine failures into consideration and the effectiveness of the optimal control policy.
Keywords :
inventory management; optimal control; base stock policy; failure prone machine; inventory rationing; lost sales; machine state dependent threshold levels; make-to-stock production system; optimal control policies; optimal inventory allocation policy; optimal production policy; production rationing; Cost function; Electric breakdown; Marketing and sales; Optimal control; Process control; Production; Resource management; Machine failures; multiclass demands; optimal control;
Journal_Title :
Automatic Control, IEEE Transactions on
DOI :
10.1109/TAC.2011.2107050