A near-optimal policy and its comparison with base stock and Kanban policies in a two-stage production and inventory system with advance demand information

2018 ◽  
Vol 3 (4) ◽  
pp. 321
Author(s):  
Koichi Nakade ◽  
Shizuru Tsuchiya
Keyword(s):  
Optimal Policy ◽  
Inventory System ◽  
Base Stock ◽  
Two Stage ◽  
Advance Demand Information ◽  
Demand Information

OPTIMAL PRODUCTION POLICIES WITH MULTISTAGE STOCHASTIC DEMAND LEAD TIMES

2009 ◽  
Vol 23 (3) ◽  
pp. 515-543 ◽  
Author(s):  
Jung-Hyun Kim ◽  
Hyun-Soo Ahn ◽  
Rhonda Righter
Keyword(s):  
Optimal Policy ◽  
Numerical Study ◽  
Base Stock ◽  
Optimal Production ◽  
Base Stock Policy ◽  
Production Policy ◽  
Markov Decision ◽  
Demand Information ◽  
Stock Policy ◽  
The Impact

We study the value of multistage advance demand information (MADI) in a production system in which customers place an order in advance of their actual need, and each order goes through multiple stages before it becomes due. Any order that is not immediately filled at its due date will be backordered. The producer must decide whether or not to produce based on real-time information regarding current and future orders. We formulate the problem as a Markov decision process and analyze the impact of the demand information on the production policy and the cost. We show that the optimal production policy is a state-dependent base-stock policy, and we show that it has certain monotonicity properties. We also introduce a simple heuristic policy that is significantly easier to compute and that inherits the structural properties of the optimal policy. In addition, we show that its base-stock levels bound those of the socially optimal policy. Numerical study identifies the conditions under which MADI is most beneficial and shows that the heuristic performs almost as well as the optimal policy when MADI is most beneficial.

Sign in / Sign up

Export Citation Format

Share Document