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Approximations for the single-product production-inventory problem with compound Poisson demand and service-level constraints

Published online by Cambridge University Press:  01 July 2016

A. G. De kok ,
H. C. Tijms  and
F. A. Van der Duyn Schouten
A. G. De kok*
Affiliation:
Vrije Universiteit, Amsterdam
H. C. Tijms*
Affiliation:
Vrije Universiteit, Amsterdam
F. A. Van der Duyn Schouten*
Affiliation:
Vrije Universiteit, Amsterdam
*
∗Postal address: Department of Actuarial Sciences and Econometrics, De Boelelaan 1081, 1081 HV Amsterdam, The Netherlands.
∗Postal address: Department of Actuarial Sciences and Econometrics, De Boelelaan 1081, 1081 HV Amsterdam, The Netherlands.
∗Postal address: Department of Actuarial Sciences and Econometrics, De Boelelaan 1081, 1081 HV Amsterdam, The Netherlands.
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Abstract

We consider a production-inventory problem in which the production rate can be continuously controlled in order to cope with random fluctuations in the demand. The demand process for a single product is a compound Poisson process. Excess demand is backlogged. Two production rates are available and the inventory level is continuously controlled by a switch-over rule characterized by two critical numbers. In accordance with common practice, we consider service measures such as the average number of stockouts per unit time and the fraction of demand to be met directly from stock on hand. The purpose of the paper is to derive practically useful approximations for the switch-over levels of the control rule such that a pre-specified value of the service level is achieved.

Keywords

VARIABLE PRODUCTION RATEAPPROXIMATE SWITCH-OVER LEVELS
Type
Research Article
Information
Advances in Applied Probability , Volume 16 , Issue 2 , June 1984 , pp. 378 - 401
Copyright
Copyright © Applied Probability Trust 1984 

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