Abstract
We consider a two-stage, pull-type production/inventory system with a known service mechanism at the first stage. Set-ups and start-ups are involved in the operation of the second stage. We develop a production control policy for the second stage, within the class of (R, r) continuous-review policies, that minimizes the long run average total cost. We use a semi-Markov decision model to obtain an optimal policy for the operation of the second stage. The structure of the optimal policy suggests the use of a suboptimal look-back policy that delays the set-up at the second stage if the buffer lacks sufficient raw material. The performance of the system and the average total cost under the suboptimal policy can be obtained approximately using a decomposition algorithm. We show examples justifying the use of this suboptimal policy.
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This research is supported by the NSF Grant No. NSF-NCR-9110105, NSF Grant No. NSF-DDM-9014868 and by the North Atlantic Treaty Organization Grant No. NATO-CRG-900580.
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Baykal-Gürsoy, M., Altiok, T. & Danhong, H. Look-back policies for two-stage, pull-type production/inventory systems. Ann Oper Res 48, 381–400 (1994). https://doi.org/10.1007/BF02024522
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DOI: https://doi.org/10.1007/BF02024522