BASE-STOCK CONTROL FOR SINGLE-PRODUCT TANDEM MAKE-TO-STOCK SYSTEMS

In this paper, we consider a multiple-stage tandem production/inventor y system producing a single product. Processing time at each stage is assumed to have a general stationary processing time distribution. The cost of holding work-in-process (WIP) inventory is different at each stage. Therefore, decisions on when to release work to the system as w ell as when to transfer WIP from one stage to another need to be made. We formulate this problem of release/production control as a Markov d ecision process. However, the optimal policy is rather complex, making its implementation impracticable in practice. We therefore investigat e the performance of simple base stock policies. Our approach aggregat es several stages into one and uses a simple approximation to compute `approximately optimal' base stock levels. We present the results of a simulation study that tests the performance of our approximation in e stimating the best base stock levels, and the performance of base stoc k policies as compared with the optimal policy.