Multi-Objective Control-Relevant Demand Modeling for Production and Inventory Control

Abstract

The development of control-oriented decision policies for inventory management in supply chains has received considerable interest in recent years, and demand modeling to supply forecasts for these policies is an important component of an effective solution to this problem. Drawing from the problem of control-relevant identification, we present an approach for demand modeling based on data that relies on a control-relevant prefllter to tailor the emphasis of the fit to the intended purpose of the model, which is to provide forecast signals to tactical inventory management policies based on model predictive control. Integrating the demand modeling and inventory control problems offers the opportunity to obtain reduced-order models that exhibit superior performance, with potentially lower user effort relative to traditional open-loop methods. A systematic approach to generating these weights and prefllters is presented and the benefits resulting from their use are demonstrated on representative production/inventory system case studies. A multi-objective formulation is developed that allows the user to emphasize minimizing inventory variance, minimizing starts variance, or their combination.