Product and operations management
Inventory/Production, multistage, serial, fill rate, base-stock policy, solution and heuristics
We analyze the problem of minimizing average inventory costs subject to fill-rate type of service-level constraints in serial and assembly production/distribution systems. We propose optimal and heuristic procedures to solve this problem. Our model and solution procedures can be used to manage the fill rate or fill rate within a “time window” service measures. We also relate our service-constrained model to the traditional model with back-order costs and show that it is possible to prespecify backorder cost rates to achieve desired service levels. We explore the inventory cost impact of such a practice, and we find that the cost penalty can be very high.
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