| Article ID: | iaor19982772 |
| Country: | Germany |
| Volume: | 46 |
| Issue: | 1 |
| Start Page Number: | 103 |
| End Page Number: | 117 |
| Publication Date: | Jan 1997 |
| Journal: | Mathematical Methods of Operations Research (Heidelberg) |
| Authors: | Liu Baoding, Cao J. |
| Keywords: | production, control processes |
This paper deals with an unreliable manufacturing system in which no backlog is allowed. The hedging point policy is used to control production. This paper's objective is to find the optimum hedging point so as to minimize the average inventory cost. Firstly, for a tentative hedging point, we derive the limiting distribution of the inventory level. This derivation is accomplished by comparison between this system and a finite storage–production system. Based on it we calculate the average inventory cost and find the optimum hedging point.