Optimization of Manufacturing Supply Chain with Stochastic Demand and Planned Delivery Time

Abstract

In this paper, we study a manufacturing system composed by a single-product machine, a buffer and a constant demand. A stochastic fluid model is adopted to describe the system and to take into account delivery times and returned products from the customers (withdraw right). The objective of this paper is to determine the optimal buffer level taken into account machine failures, delivery times and withdrawal right. This optimal buffer allows minimizing the sum of inventory, transportation, lost sales and returned products costs. Infinitesimal perturbation analysis method is used for optimizing the proposed system. Using the stochastic fluid model, the trajectories of buffer level are studied and the infinitesimal perturbation analysis estimators are evaluated. These estimators are shown to be unbiased and then they are implanted in an optimization algorithm which determines the optimal buffer level in the presence of delivery time and withdrawal right.