Dynamic Control in Multi-Item Production/Inventory Systems

29 Pages Posted: 14 Nov 2014

See all articles by Harold Tiemessen

Harold Tiemessen

St. Gallen University of Applied Sciences (FHS) - Institute of Modelling and Simulation (IMS-FHS)

Moritz Fleischmann

University of Mannheim, Business School

Geert-Jan van Houtum

Eindhoven University of Technology (TUE)

Date Written: November 7, 2014

Abstract

We consider a production/inventory system consisting of one production line and multiple products. Finished goods are kept in stock to serve stochastic demand. Demand is fulfilled immediately if there is an item of the requested product in stock and otherwise it is backordered and fulfilled later. The production line is modeled as a non-preemptive single server and the objective is to minimize the sum of the average inventory holding costs and backordering costs. We investigate the structure of the optimal production policy, propose a new scheduling policy, and develop a method for calculating base stock levels under an arbitrary but given scheduling policy. The performance of the various production policies is evaluated in extensive numerical experiments.

Keywords: Inventory control, Dynamic scheduling, Simulation Optimization

JEL Classification: C61, M11

Suggested Citation

Tiemessen, Harold and Fleischmann, Moritz and van Houtum, Geert-Jan, Dynamic Control in Multi-Item Production/Inventory Systems (November 7, 2014). Available at SSRN: https://ssrn.com/abstract=2523838 or http://dx.doi.org/10.2139/ssrn.2523838

Harold Tiemessen

St. Gallen University of Applied Sciences (FHS) - Institute of Modelling and Simulation (IMS-FHS) ( email )

St. Gallen, 9001
Switzerland

Moritz Fleischmann (Contact Author)

University of Mannheim, Business School ( email )

University of Mannheim
P.O. Box 10 34 62
Mannheim, 68131
Germany

Geert-Jan Van Houtum

Eindhoven University of Technology (TUE) ( email )

PO Box 513
Eindhoven, 5600 MB
Netherlands

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