Stability Considerations and Service Level Measures in Production Inventory Systems: a Simulation Study

This paper analyzes the ability of the general production-inventory replenishment policy to maintain desired level of service. Key control parameters that affect stability of the replenishment policy are the fractional rates of adjustments of discrepancies in WIP and inventory. The effect of these control parameters on the service level (order fill rate) of the production-inventory system which face independent and identically distributed (i.i.d.) random demand is investigated. A replenishment policy that explicitly accounts for the safety stock, and thus improves the service levels, has been proposed. The range of parameter settings that assures the desired service level without affecting system stability has been determined.