IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v9y1962i1p108-122.html
   My bibliography  Save this article

A Random Walk Production-Inventory Policy: Rationale and Implementation

Author

Listed:
  • Daniel Orr

    (University of Chicago, Chicago, Illinois)

Abstract

The smoothing of fluctuations in production and inventory has been handled successfully as a problem in servomechanisms: an optimal linear filter (production scheduling policy) balances costs of inventory fluctuation and costs of production fluctuation. This approach requires the system to respond (by making production rate changes) either continuously or at regular intervals: the usual assumption is that the cost of responding is proportional to the size of the response. This paper explores some reasons why the frequency of production changes may have to be controlled, and offers a new class of policies, called random walk policies, to accomplish this. One of these, the (a, b, c) policy, is investigated for stationary operating characteristics, and a specific example is provided to illustrate the technique of finding optimal values for policy parameters. Some of the characteristics of systems in which random walk inventory policies may be useful are discussed; and more general techniques for identifying the form of the optimal control policy are mentioned.

Suggested Citation

  • Daniel Orr, 1962. "A Random Walk Production-Inventory Policy: Rationale and Implementation," Management Science, INFORMS, vol. 9(1), pages 108-122, October.
    • Handle: RePEc:inm:ormnsc:v:9:y:1962:i:1:p:108-122
    DOI: 10.1287/mnsc.9.1.108
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.9.1.108
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.9.1.108?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wu, Chia-Chin & Chang, Ni-Bin, 2004. "Corporate optimal production planning with varying environmental costs: A grey compromise programming approach," European Journal of Operational Research, Elsevier, vol. 155(1), pages 68-95, May.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:9:y:1962:i:1:p:108-122. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.