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The value of information used in inventory control of a make-to-order inventory-production system

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IIE Transactions

Abstract

This paper studies a make-to-order inventory-production system consisting of a warehouse and a workshop. The concept of information level as the detail available on the number of unfilled demands at the workshop is introduced. The focal point is the value of the information used in inventory control in the warehouse. Dynamic programming is used to develop an algorithm for computing the optimal replenishment policy and the average total inventory cost per product. Numerical analysis is carried out and the results show that information used in inventory control can reduce the total inventory cost significantly. It is shown that the classical (Q,R) policy may not perform well if information about the number of demands is partially or fully available.

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Authors and Affiliations

  1. Department of Industrial Engineering, Dalhousie University Halifax, Nova Scotia, Canada, B3J 2X4

    Qi-Ming He

  2. Department of Management Sciences, University of Waterloo, Waterloo, Ontario, Canada, N2L 3G1

    E.M. Jewkes

  3. Schulich School of Business, York University, North York, Ontario, Canada, M3J 1P3

    J. Buzacott

Authors
  1. Qi-Ming He
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  2. E.M. Jewkes
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  3. J. Buzacott
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He, QM., Jewkes, E. & Buzacott, J. The value of information used in inventory control of a make-to-order inventory-production system. IIE Transactions 34, 999–1013 (2002). https://doi.org/10.1023/A:1016138831773

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