TY - JOUR
T1 - Production-inventory systems with imperfect advance demand information and updating
AU - Benjaafar, Saif
AU - Cooper, William L.
AU - Mardan, Setareh
PY - 2011/3
Y1 - 2011/3
N2 - We consider a supplier with finite production capacity and stochastic production times. Customers provide advance demand information (ADI) to the supplier by announcing orders ahead of their due dates. However, this information is not perfect, and customers may request an order be fulfilled prior to or later than the expected due date. Customers update the status of their orders, but the time between consecutive updates is random. We formulate the production-control problem as a continuous-time Markov decision process and prove there is an optimal state-dependent base-stock policy, where the base-stock levels depend upon the numbers of orders at various stages of update. In addition, we derive results on the sensitivity of the state-dependent base-stock levels to the number of orders in each stage of update. In a numerical study, we examine the benefit of ADI, and find that it is most valuable to the supplier when the time between updates is moderate. We also consider the impact of holding and backorder costs, numbers of updates, and the fraction of customers that provide ADI. In addition, we find that while ADI is always beneficial to the supplier, this may not be the case for the customers who provide the ADI.
AB - We consider a supplier with finite production capacity and stochastic production times. Customers provide advance demand information (ADI) to the supplier by announcing orders ahead of their due dates. However, this information is not perfect, and customers may request an order be fulfilled prior to or later than the expected due date. Customers update the status of their orders, but the time between consecutive updates is random. We formulate the production-control problem as a continuous-time Markov decision process and prove there is an optimal state-dependent base-stock policy, where the base-stock levels depend upon the numbers of orders at various stages of update. In addition, we derive results on the sensitivity of the state-dependent base-stock levels to the number of orders in each stage of update. In a numerical study, we examine the benefit of ADI, and find that it is most valuable to the supplier when the time between updates is moderate. We also consider the impact of holding and backorder costs, numbers of updates, and the fraction of customers that provide ADI. In addition, we find that while ADI is always beneficial to the supplier, this may not be the case for the customers who provide the ADI.
KW - advance demand information
KW - continuous-time Markov decision processes
KW - make-to-stock queues
KW - production-inventory systems
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U2 - 10.1002/nav.20443
DO - 10.1002/nav.20443
M3 - Article
AN - SCOPUS:79951911280
SN - 0894-069X
VL - 58
SP - 88
EP - 106
JO - Naval Research Logistics
JF - Naval Research Logistics
IS - 2
ER -