When is a base stock policy optimal in recovering disrupted cyclic schedules?

The extended economic lot scheduling problem (EELSP) is concerned with scheduling the production of a set of items in a single facility to minimize the long-run average holding, backlogging, and setup costs. Given an efficient cyclic production schedule for the EELSP, called the target schedule, the paper considers the problem of how to schedule production after a single schedule disruption. It proposes a base stock policy, characterized by a base stock vector, that prescribes producing an item until its inventory level reaches the peak inventory of the target schedule corresponding to the item’s position in the production sequence. The paper shows that the base stock policy is always successful in recovering the target schedule. Moreover, the base stock policy recovers the target schedule at minimal excess over average cost whenever the backorder costs are proportional to the processing times. This condition holds, for example, when the value of the items is proportional to their processing times, and a common inventory carrying cost and a common service level is used for all the items. Alternatively, the proportionality condition holds if the inventory manager is willing to select the service levels from a certain set that is large enough to guarantee any minimal level of service, and then uses the imputed values for the backorder costs. When the proportionality condition holds the paper provides a closed-form expression for the total relevant excess over average cost of recovering the target schedule. It assesses the performance of the base stock policy when the proportionality condition does not hold through a numerical study, and suggests some heuristic uses of the base stock policy.