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Admission and inventory control of a single-component make-to-order production system with replenishment setup cost and lead time

Title
Admission and inventory control of a single-component make-to-order production system with replenishment setup cost and lead time
Authors
Kim E.Park T.
Ewha Authors
김은갑
SCOPUS Author ID
김은갑scopus
Issue Date
2016
Journal Title
European Journal of Operational Research
ISSN
0377-2217JCR Link
Citation
vol. 255, no. 1, pp. 91 - 102
Keywords
Admission controlInventoryMake-to-order systemMarkov decision processesSetup cost
Publisher
Elsevier
Indexed
SCIE; SCOPUS WOS scopus
Abstract
We consider the admission control and inventory management problems of a single-component make-to-order production system. Components are purchased from suppliers in batches of fixed size subject to stochastic lead times and setup costs. A control policy specifies when a batch of components is purchased, and whether the demand for each MTO production is accepted upon arrival. We formulate the problem as a Markov decision process (MDP) model, and characterize the structure of optimal admission control and inventory replenishment policies. We show that a state dependent base-stock policy is optimal for the inventory replenishment, although the MDP value function is not necessarily convex. We also show that the optimal admission control can be identified as a lattice dependent policy. A sensitivity analysis is conducted to show how the optimal policy changes as a function of the system parameters. To effectively coordinate admission and inventory control decisions, we propose simple, implementable, and yet effective heuristic policies. Our extensive numerical results suggest that the proposed heuristics can greatly help firms to effectively coordinate their admission and inventory control activities. © 2016 Elsevier B.V. All rights reserved.
DOI
10.1016/j.ejor.2016.04.021
Appears in Collections:
경영대학 > 경영학전공 > Journal papers
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