Reduce shortage with self-reservation policy for a manufacturer paying both fixed and variable stockout expenditure

B. Huang, A. Wu

Onderzoeksoutput: Bijdrage aan tijdschriftTijdschriftartikelAcademicpeer review

1 Citaat (Scopus)
7 Downloads (Pure)

Samenvatting

This study considers a single item make-to-stock system with continuous-time production and inventory controls to meet bulk demand with an exponential inter-arrival time. A key issue in this system is the non-convex shortage cost consisting of fixed and variable expenditures when the demand is not fully satisfied. We propose a self-reservation policy by building a Markov Decision Process to minimize the overall cost. We find that the optimal production control is still a base stock policy, but the structure of the optimal self-reservation policy is very complicated. However, if the effective outstanding variable shortage cost is sufficiently large, the optimal self-reservation policy has an easy form of “Reserve All or Nothing.” Our numerical examples indicate the optimal policy may reduce the total average cost by 47% on average.

Originele taal-2Engels
Pagina's (van-tot)944-953
Aantal pagina's10
TijdschriftEuropean Journal of Operational Research
Volume262
Nummer van het tijdschrift3
DOI's
StatusGepubliceerd - 1 nov 2017

Vingerafdruk

Duik in de onderzoeksthema's van 'Reduce shortage with self-reservation policy for a manufacturer paying both fixed and variable stockout expenditure'. Samen vormen ze een unieke vingerafdruk.

Citeer dit