Abstract
We consider production and inventory rationing of a product to fulfill multiple demand classes in a make-to-stock production system with a failure-prone machine. Demand that cannot be satisfied immediately is lost and incurs a lost sales cost, which differs from class to class. We find that the optimal control policies under both the expected total discounted cost criterion and the average cost criterion have similar structural properties. Specifically, the optimal production policy is the base-stock policy and the optimal inventory allocation policy is the threshold control policy with machine-state-dependent threshold levels. Finally, we provide numerical examples to show the importance of taking machine failures into consideration and the effectiveness of the optimal control policy.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
