Optimal Production and Inventory Policy for Multiple Products Under Resource Constraints

Gregory A. DeCroix and Antonio Arreola-Risa
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Gregory A. DeCroix: School of Business Administration, University of Washington, Seattle, Washington 98195
Antonio Arreola-Risa: Lowry Mays College and Graduate School of Business, Texas A&M University, College Station, Texas 77843-4217

Management Science, 1998, vol. 44, issue 7, 950-961

Abstract: We show that a modified base-stock policy is optimal for multiproduct, infinite-horizon production-inventory systems, where demand for the products is random and the products share a finite resource every period. We characterize the optimal policy for the case of homogeneous products. Because of the difficulty in computing the optimal base-stock levels for the heterogeneous case, we propose a heuristic that is simple enough for practical applications. We present numerical results that suggest that the heuristic yields near-optimal solutions.

Keywords: Capacitated Production-Inventory System; Production-Priority Policy; Inventory-Replenishment Policy (search for similar items in EconPapers)
Date: 1998
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Citations: View citations in EconPapers (31)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:44:y:1998:i:7:p:950-961

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