Setting Base Stock Levels Using Product-Form Queueing Networks
AbstractA 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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Bibliographic InfoArticle provided by INFORMS in its journal Management Science.
Volume (Year): 42 (1996)
Issue (Month): 2 (February)
production/inventory systems; queueing networks;
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