Performance evaluation of a production/inventory system with periodic review and endogenous lead times
Boute, Robert Lambrecht, Marc Van Houdt, Benny
Boute, Robert
Lambrecht, Marc
Van Houdt, Benny
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Publication Type
Journal article with impact factor
Editor
Supervisor
Publication Year
2007
Journal
Naval Research Logistics
Book
Publication Volume
54
Publication Issue
4
Publication Begin page
462
Publication End page
473
Publication NUmber of pages
Abstract
This paper considers a discrete time, single item production/inventory system with random period demands. Inventory levels are reviewed periodically and managed using a base-stock policy. Replenishment orders are placed with the production system which is capacitated in the sense that there is a single server that sequentially processes the items one at a time with stochastic unit processing times. In this setting the variability in demand determines the arrival pattern of production orders at the queue, influencing supply lead times. In addition, the inventory behavior is impacted by the correlation between demand and lead times: a large demand size corresponds to a long lead time, depleting the inventory longer. The contribution of this paper is threefold. First, we present an exact procedure based on matrix-analytic techniques for computing the replenishment lead time distribution given an arbitrary discrete demand distribution. Second, we numerically characterize the distribution of inventory levels, and various other performance measures such as fill rate, base-stock levels and optimal safety stocks, taking the correlation between demand and lead times into account. Third, we develop an algorithm to fit the first two moments of the demand and service time distribution to a discrete phase-type distribution with a minimal number of phases. This provides a practical tool to analyze the effect of demand variability, as measured by its coefficient of variation, on system performance. We also show that our model is more appropriate than some existing models of capacitated systems in discrete time.
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Keywords
Logistics Management