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On the value of information in dynamic production/inventory problems under forecast evolution

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  • Refik Güllü

Abstract

In this article we explore how total system costs and inventory positions are affected when forecasts are incorporated explicitly in production/inventory systems. We assume that forecasts for demand of a certain item are available in each period, and they evolve from one period to the next in accordance with an additive evolution model. In order to analyze the effects of the forecasts on the production/inventory system we compare the optimal ordering policy and the expected costs of the model that keeps forecasts with that of a comparable standard inventory model. We show that under mild assumptions the former yields lower expected costs and inventory levels than the latter. © 1996 John Wiley & Sons, Inc.

Suggested Citation

  • Refik Güllü, 1996. "On the value of information in dynamic production/inventory problems under forecast evolution," Naval Research Logistics (NRL), John Wiley & Sons, vol. 43(2), pages 289-303, March.
    • Handle: RePEc:wly:navres:v:43:y:1996:i:2:p:289-303
    DOI: 10.1002/(SICI)1520-6750(199603)43:23.0.CO;2-6
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    References listed on IDEAS

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    1. Warren H. Hausman, 1969. "Sequential Decision Problems: A Model to Exploit Existing Forecasters," Management Science, INFORMS, vol. 16(2), pages 93-111, October.
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    Cited by:

    1. Borga Deniz, 2012. "Inventory Control with Advance Demand Information When Demand is Intermittent," Business and Management Research, Business and Management Research, Sciedu Press, vol. 1(4), pages 35-45, December.

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