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Joint capacity, inventory and demand allocation decisions in manufacturing systems

Bayram, Vedat, Gzara, Fatma, Elhedhli, Samir (2018) Joint capacity, inventory and demand allocation decisions in manufacturing systems. IISE Transactions, 51 (3). pp. 248-265. ISSN 2472-5854. E-ISSN 2472-5862. (doi:10.1080/24725854.2018.1490045) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided) (KAR id:99642)

The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided. (Contact us about this Publication)
Official URL:
https://dx.doi.org/10.1080/24725854.2018.1490045

Abstract

We study the demand, inventory and capacity allocation problem in production systems with multiple inventory locations and a production facility operating under linear and concave costs. Independent stochastic demand from multiple sources is fulfilled from multiple warehouses that are in turn replenished from a shared production facility with stochastic production lead times. We propose a novel formulation of the demand allocation problem and show that the optimal customer allocations are not necessarily single sourced. The new formulation allows the inclusion of additional decisions alongside demand and inventory allocation. Capacity decisions are incorporated under two cost structures: linear and concave. For the concave case, we show that for a given demand and inventory allocation, the optimal capacity of the production facility takes on discrete values within a finite set, which allows the objective to be linearized. We demonstrate numerically that the joint optimization of capacity, inventory and demand allocation decisions has significant cost savings over a sequential decision and leads to a high utilization of the production facility under linear capacity costs, but relatively low utilization under concave costs. Safety stock, on the other hand at the distribution centers is relatively low under linear and concave cost.

Item Type: Article
DOI/Identification number: 10.1080/24725854.2018.1490045
Uncontrolled keywords: Production inventory systems; demand allocation; capacity allocation; inventory management; economies of scale
Subjects: H Social Sciences
Divisions: Divisions > Kent Business School - Division > Department of Analytics, Operations and Systems
Funders: TED University (https://ror.org/0285rh439)
Depositing User: Vedat Bayram
Date Deposited: 23 Jan 2023 09:44 UTC
Last Modified: 25 Jan 2023 12:24 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/99642 (The current URI for this page, for reference purposes)

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