Protective stocks in multi-stage production systems

SUMMARY

Uncertainty in MRP systems does exist in several forms, variability in demand from period to period, uncertainty in the supply from stage to stage due to the variability in the yields from each production batch, and uncertainty in the lead times. The goals of the paper are to develop theoretical models for determining optimal decisions in this uncertain environment, to develop a computationally tractable heuristic and to examine how safety stock and safety time can arise. Finally, our methodology is compared with MRP practice.