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Setting Base Stock Levels Using Product-Form Queueing Networks

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Author Info

  • Rodrigo Rubio

    (Operations Research Center, Massachusetts Institute of Technology, Cambridge, Massachusetts 02139)

  • Lawrence M. Wein

    (Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts 02139)

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    Abstract

    A manufacturing facility produces multiple products in a make-to-stock manner, and unsatisfied demand is backordered. A simple production control policy is analyzed: When the amount of work-in-process inventory plus finished goods inventory for a particular product falls below a base stock level, then release another unit of that product onto the shop floor. Assuming that the work-in-process inventory has a steady state distribution and that there are different costs incurred for carrying in-process, completed and backordered units, we show that the cost minimizing base stock level for each product is a critical fractile of the steady state distribution of the product's total work-in-process inventory. By exploiting the relationship between the make-to-stock system and an open queueing network, we identify specific formulas for the base stock levels under standard product-form assumptions. For the lost sales case, a similar relation to a closed queueing network can be used to characterize the optimal control parameters.

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    File URL: http://dx.doi.org/10.1287/mnsc.42.2.259
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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 42 (1996)
    Issue (Month): 2 (February)
    Pages: 259-268

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    Handle: RePEc:inm:ormnsc:v:42:y:1996:i:2:p:259-268

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    Related research

    Keywords: production/inventory systems; queueing networks;

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    Cited by:
    1. Caldentey, René. & Wein, Lawrence M., 1999. "Analysis of decentralized production-inventory system," Working papers WP 4099-99., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    2. Liberopoulos, George & Koukoumialos, Stelios, 2005. "Tradeoffs between base stock levels, numbers of kanbans, and planned supply lead times in production/inventory systems with advance demand information," International Journal of Production Economics, Elsevier, vol. 96(2), pages 213-232, May.
    3. Sanajian, Nima & BalcIog[small tilde]lu, BarIs, 2009. "The impact of production time variability on make-to-stock queue performance," European Journal of Operational Research, Elsevier, vol. 194(3), pages 847-855, May.
    4. Toktay, Latife Beril, 1970- & Wein, Lawrence A. & Zenios, Stefanos A., 1997. "Inventory management of remanufacturable products," Working papers WP 3965-97., Massachusetts Institute of Technology (MIT), Sloan School of Management.

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