Technical Note—Production Management with General Demands and Lost Sales

Abstract

Analyzing Production-Inventory Systems with General Demand: Cost Minimization and Risk Analytics Frequent production rate changes are prohibitive because of high setup costs or setup times in producing such items as sugar, glass, computer displays, and cell-free proteins. Thus, constant production rates are deployed for producing these items even when their demands are random. In “Production Management with General Demands and Lost Sales,” Han, Li, Sethi, Siu, and Yam obtain the optimal constant production rate for a production-inventory system with Lévy demand for long-run average and expected discounted cost objectives, explicitly in some cases and numerically in general with a Fourier-cosine scheme they develop. This scheme can help in computing risk analytics of the inventory system, such as stockout probability and expected shortfall. These measures are particularly significant for assessing supply resilience, especially for emergency products or services like medicines and healthcare equipment. This study’s analytical and numerical findings contribute to enhancing efficiency and decision making in production management.