Journal
INTERNATIONAL JOURNAL OF PRODUCTION RESEARCH
Volume 47, Issue 9, Pages 2461-2483Publisher
TAYLOR & FRANCIS LTD
DOI: 10.1080/00207540701666824
Keywords
stock control; forecasting; lead-time demand; simulation; empirical analysis
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Funding
- Engineering and Physical Sciences Research Council (EPSRC, UK) [EP/D062942/1]
- Engineering and Physical Sciences Research Council [EP/D062942/1] Funding Source: researchfish
- EPSRC [EP/D062942/1] Funding Source: UKRI
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A new forecast-based dynamic inventory control approach is discussed in this paper. In this approach, forecasts and forecast uncertainties are assumed to be exogenous data known in advance at each period over a fixed horizon. The control parameters are derived by using a sequential procedure. The merits of this approach as compared to the classical one are presented. We focus on a single-stage and single-item inventory system with non-stationary demand and lead-time uncertainty. A dynamic re-order point control policy is analysed based on the new approach and its parameters are determined for a given target cycle service level (CSL). The performance of this policy is assessed by means of empirical experimentation on a large demand data set from the pharmaceutical industry. The empirical results demonstrate the benefits arising from using such a policy and allow insights to be gained into other pertinent managerial issues.
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