Inventory levels to stop and restart a single machine producing one product

Abstract A central problem in production planning is the coordination of the production rate with the inventory level in order to find a suitable compromise between the inventory on hand, the frequency of changes in the production rate and customer service. This paper deals with an one product production/inventory problem with an intermittently operating production facility controlled by inventory levels to shut down and restart production. The demand process is a compound Poisson process and a service level constraint is imposed on the fraction of demand to be met directly from stock on hand. The paper presents a tractable two-moments approximation for the control rule for starting up and shutting down the production.