Discrete-Time Control of Production-Inventory Systems With Deteriorating Stock and Unreliable Supplies

Abstract

This paper addresses the problem of establishing an efficient (fast yet robust) inventory management policy for production-inventory systems in which the stock deteriorates with time and the replenishment process is unreliable. The stock used to satisfy uncertain, variable demand is refilled using multiple supply options. Owing to information distortion, product defects, manufacturing faults, or improper transportation, the goods quantity obtained from the suppliers differs from the ordered one. The setting is modeled as an uncertain, time-varying discrete-time system with multiple time delays. A new compensation mechanism, which provides a smooth ordering pattern and ensures closed-loop stability for a delay spanning arbitrary number of review periods is proposed. The developed strategy outperforms the classical order-up-to policy in mitigating demand variations and prevents the bullwhip effect despite unpredictable distortions of the supply process.

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