Optimal inventory configuration of finished and semifinished products in multi-stage production inventory system with an acceptable response time

In this paper, the quantitative relationship between finished and semifinished product inventory levels considering both the specified service rate and an acceptable response time is firstly shown. Then, based on the results of the analysis, the optimal inventory configuration obtained by a mathematical approach is proposed and is compared with the configuration obtained by a heuristic method which would reflect on the insight of inventory managers. Numerical experiments show the superiority of the optimal approach regarding the stability of service rate to the variation of processing rates.