A (T,S) inventory/production system with limited production capacity and uncertain demands

We consider a single-item, single-location, (T,S) inventory/production mode l with uncertain demands in which a production capacity is limited per peri od. Our model is different from previous research in this area since we con sider production decisions made before observing demand. A Markov chain mod el of the shortfall for inventory is constructed, which enables one to inve stigate not only the stationary situation but also the time-dependent behav ior of system characteristics of interest in our model. In particular, the time-dependent distributions of the leadtime and the customer waiting time are expressed in terms of the transition probabilities of the Markov chain. The effects of limited production capacity and the order-up-to-level on pe rformance characteristics are also discussed. Finally, a numerical example is given to illustrate our results. (C) 1999 Elsevier Science B.V. All righ ts reserved.