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Concepts for Safety Stock Determination under Stochastic Demand and Different Types of Random Production Yield

  • Karl Inderfurth

    ()

    (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

  • Stephanie Vogelgesang

    ()

    (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

Registered author(s):

    We consider a manufacturer's stochastic production/inventory problem under periodic review and present concepts for safety stock determination to cope with uncertainties that are caused by stochastic demand and different types of yield randomness. Order releases follow a linear control rule. Taking manufacturing lead times into account it turns out that safety stocks have to be considered that vary from period to period. We present an approach for calculating these dynamic safety stocks. Additionally, to support practical manageability we suggest two approaches for determining appropriate static safety stocks that are easier to apply.

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    File URL: http://www.fww.ovgu.de/fww_media/femm/femm_2011/2011_03.pdf
    File Function: First version, 2011
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    Paper provided by Otto-von-Guericke University Magdeburg, Faculty of Economics and Management in its series FEMM Working Papers with number 110003.

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    Length: 24 pages
    Date of creation: Feb 2011
    Date of revision:
    Handle: RePEc:mag:wpaper:110003
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