Abstract
Stock levels of inventory-production systems has to be optimized such that inventory holding cost reduce meanwhile customer satisfaction increase. But not all companies has such capability due to different types of limitations that exist in the real world. One of these limitations is production constraints which forces manufacturing line to operate under specific upper and lower boundaries. A control theory model of this phenomena has been proposed for zero target inventory resulting in stock out during peak market demand. In this paper we aim to extend it to non-zero target inventory conditions to analyze safety stock levels. Therefore we will be able to find a certain target inventory for each demand frequency to prevent stock out and increase customer satisfaction.
