Concepts for Safety Stock Determination under Stochastic Demand and Different Types of Random Production Yield

Karl Inderfurth () and Stephanie Vogelgesang ()
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Karl Inderfurth: Faculty of Economics and Management, Otto-von-Guericke University Magdeburg
Stephanie Vogelgesang: Faculty of Economics and Management, Otto-von-Guericke University Magdeburg

No 110003, FEMM Working Papers from Otto-von-Guericke University Magdeburg, Faculty of Economics and Management

Abstract: We consider a manufacturer's stochastic production/inventory problem under periodic review and present concepts for safety stock determination to cope with uncertainties that are caused by stochastic demand and different types of yield randomness. Order releases follow a linear control rule. Taking manufacturing lead times into account it turns out that safety stocks have to be considered that vary from period to period. We present an approach for calculating these dynamic safety stocks. Additionally, to support practical manageability we suggest two approaches for determining appropriate static safety stocks that are easier to apply.

Keywords: stochastic demand; random yield; lot sizing; safety stocks (search for similar items in EconPapers)
Pages: 24 pages
Date: 2011-02
New Economics Papers: this item is included in nep-agr
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:mag:wpaper:110003

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