Abstract
To decrease the effect of forecasting errors on the production plans, a dynamic production planning rule in which the plans are revised at the end of each period, using updated forecasts, is suggested. The characteristics of the rule are analyzed in single item and infinite horizon case when the rule is applied to demand series with exponential autocorrelation. Two forecasting cases are treated. The veriances of production and inventory are analytically derived, using the property that the exponentially autocorrelated demand series can be expressed by a linear combination of independent variables. The results are extended to describe the conditions in which the rule is applicable.
