Two-stage, multi-product production/inventory systems

Abstract

A production/inventory system consisting of two single-stage facilities with a finite capacity buffer in between and a warehouse at the downstream end, producing multiple product types is considered. The demand process for each product is assumed to follow a Poisson distribution and the excess demand is backordered. Products have a priority structure and the processor is shared according to a switching rule. ( R, r) continuous-review inventory control policy is used to start and stop production of each product at the second facility and a slightly modified version of it is used at the first facility. Production of a product continues until its target level is reached. Then, a switch-over takes place to the highest priority product amongst the ones that need the processor's attention. A set-up takes place every time a switch-over occurs. Both processing and set-up times are assumed to have exponential distributions. Our objective is to obtain the steady-state average inventory and backorder levels for each product. We have developed an approximation procedure to characterize the delay each product type experiences in receiving the processor's attention.