Operating Characteristics of a Simple Production, Inventory-Control Model

Queuing theory is adapted to study the coordination of a continuous-level production rate with a base-stock level inventory policy, where the latter is depleted by a particular random demand process. Figures of merit for the combined production, inventory system (such as stock-out probability and expected demand delay, average inventory level, and production idleness probability) are given in terms of demand parameters, production rate, and maximum stock level. Costs are discussed, and a criteria is given for deciding when the stocking of inventory is economically desirable. Improvements in the model are proposed.