A Study of the Variances of Production and Inventory in a Two-Stage Single-Item Production-Inventory System : A Study of Production-Inventory System(Part V)

Abstract

In a two-stage single-item production-inventory system, the variances of production and inventory are analyzed when the Standerd Linear Procduction Planning Rule is used for each stage to absorb the fluctuation in orders received. The planning rule has a parameter z to adjust the fluctuations in production and inventory. These variances at each stage are derived numerically for a demand series with exponential autocorrelation, using the property of impluse responese. The result may be used to decide how and where the fluctuation of finished demand should be absorbed.