Determination of an order-up-to policy in the stochastic economic lot scheduling model

Determination of an order-up-to policy in the stochastic economic lot scheduling model

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Article ID: iaor200563
Country: Netherlands
Volume: 90
Issue: 3
Start Page Number: 377
End Page Number: 389
Publication Date: Jan 2004
Journal: International Journal of Production Economics
Authors: , ,
Keywords: economic order
Abstract:

We consider a production–inventory problem with compound renewal item demand. The model consists of stockpoints, one for each item, controlled according to (R, S)-policies and one machine which replenishes them. The replenishment orders are produced with a fixed rate on the machine with significant setup times and costs, which are stochastic and sequence dependent. The time between the release and the production of the replenishment order is called the waiting time. We develop analytical approximations for the first two moments of this waiting time, the order-up-to levels and the average physical inventory levels for all stockpoints, given the target fill rates. These analytical approximations allow for a quick evaluation of the waiting time which is important when optimization of the system is considered.

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