Abstract
The safety stocks of internal stores are analysed in a production line. Production may often be disturbed by random factors such as machine failures, faulty products, breakdowns, etc. In this case both the demand and delivery process of each internal store have to be described by random processes, mostly by random step functions. If there is considerable random influence in the production process, a great difficulty for the production managers is to provide for continuous production with reasonable in-process inventories. Stochastic programming models have been formulated for the minimization of the total capital invested in safety stocks under prescribed probability constraints subject to the continuous supply of each stage of production. Based on the asymptotic distribution of the shortage probability, simple deterministic methods have been derived for the approximate solution and they have been applied in practice.
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