Optimal control of a production-inventory system with customer impatience

Authors:
Saif Benjaafar;Jean-Philippe Gayon;Seda Tepe
Affiliations:
Industrial and Systems Engineering, University of Minnesota, Minneapolis, MN 55455, USA;Laboratoire G-scop, Grenoble INP, 46 Avenue Félix Vialet, 38031 Grenoble Cedex, France;Industrial and Systems Engineering, University of Minnesota, Minneapolis, MN 55455, USA
Venue:
Operations Research Letters
Year:
2010

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Abstract

We consider the control of a production-inventory system with impatient customers. We show that the optimal policy can be described using two thresholds: a production base-stock level that determines when production takes place and an admission threshold that determines when orders should be accepted. We describe an algorithm for computing the performance of the system for any choice of base-stock level and admission threshold. In a numerical study, we compare the performance of the optimal policy against several other policies.