Adaptive Production and Inventory Control in Supply Chains against Changing Demand Uncertainty

Abstract

We applied an adaptive controller to the general model of a replenishment rule. The replenishment rule is the “automatic pipeline, variable inventory and order based production control system”. In the current literature the possibility to reduce the bullwhip effect and demand fluctuations by setting the right smoothing parameters to this replenishment rule was shown for independently and identically distributed stationary stochastic demand. In the real world the demand uncertainties are changing (e.g. along the product life cycle). On this account we developed a gain scheduling adaptive control mechanism, which is able to adjust the parameter based on states of the system and demand uncertainties. With the adaptive controller the system can be adapted to uncertainties in demand by holding the production fluctuations stable and adjust smoothly to a new appropriate inventory coverage level by setting the right inventory adjustment parameter, the right target inventory level and the right forecast time.