Approximations for operating characteristics in a production-inventory model with variable production rate (Q1821006)

A single item inventory control model with continuous production is introduced in this paper. The production rate may be switched between two distinct levels, a high and a low level, the latter being possibly zero. Customers' demands are assumed to be independent and identically distributed and arising at random times according to a Poisson process. Both cases, the backlog and the lost-sales case are treated simultaneously. The control rule used is the familiar (s,S)-policy and the objective is to minimize the long run inventory and production costs, maintaining a prespecified service level. Using properties of regenerative stochastic processes approximate expressions for the average one-hand inventory as well as the average frequency of the production level changes are derived, which in turn are used to formulate an approximation algorithm for determination of the optimal control policy. The accuracy of the approximations is demonstrated in numerical examples. The paper relies to a great deal on previous publications of the same author.