Optimal production and inventory policy for multiple products under resource constraints

Optimal production and inventory policy for multiple products under resource constraints

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Article ID: iaor200044
Country: United States
Volume: 44
Issue: 7
Start Page Number: 950
End Page Number: 961
Publication Date: Jul 1998
Journal: Management Science
Authors: ,
Keywords: production
Abstract:

We show that a modified base-stock policy is optimal for multiproduct, infinite-horizon production-inventory systems, where demand for the products is random and the products share a finite resource every period. We characterize the optimal policy for the case of homogeneous products. Because of the difficulty in computing the optimal base-stock levels for the heterogeneous case, we propose a heuristic that is simple enough for practical applications. We present numerical results that suggest that the heuristic yields near-optimal solutions.

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