We consider a single-item, single-location, (T,S) inventory/production model with uncertain demands in which a production capacity is limited per period. Our model is different from previous research in this area since we consider production decisions made before observing demand. A Markov chain model of the shortfall for inventory is constructed, which enables one to investigate not only the stationary situation but also the time-dependent behavior of system characteristics of interest in our model. In particular, the time-dependent distributions of the leadtime and the customer waiting time are expressed in terms of the transition probabilities of the Markov chain. The effects of limited production capacity and the order-up-to-level on performance characteristics are also discussed. Finally, a numerical example is given to illustrate our results.
