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

Author

Listed:
  • Karl Inderfurth

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

  • Stephanie Vogelgesang

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

Abstract

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.

Suggested Citation

  • Karl Inderfurth & Stephanie Vogelgesang, 2011. "Concepts for Safety Stock Determination under Stochastic Demand and Different Types of Random Production Yield," FEMM Working Papers 110003, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
  • Handle: RePEc:mag:wpaper:110003
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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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    Cited by:

    1. Tomáš Buus, 2011. "Sharing Cost of Shared Services Centre," European Financial and Accounting Journal, University of Economics, Prague, vol. 2011(4), pages 49-59.

    More about this item

    Keywords

    stochastic demand; random yield; lot sizing; safety stocks;

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