Probabilistic service level guarantees in make-to-stock manufacturing systems

We consider a model of a multiclass make-to-stock manufacturing system. Ext ernal demand for each product class is met from the available finished good s inventory; unsatisfied demand is backlogged. The objective is to devise a production policy that minimizes inventory costs subject to guaranteeing s tockout probabilities to stay bounded above by given constants epsilon (j), for each product class j (service level guarantees). Such a policy determi nes whether the facility should be producing (idling decisions), and if it should, which product class (sequencing decisions). Approximating the origi nal system, we analyze a corresponding fluid model to make sequencing decis ions and employ large deviations techniques to make idling ones. We conside r both linear and quadratic inventory cost structures to obtain a priority- based and a generalized longest queue first-bused production policy, respec tively. An important feature of our model is that it accommodates autocorre lated demand and service processes, both critical features of modem failure -prone manufacturing systems.