Optimal Dynamic Production And Unidirectional Inventory Transshipment Policies For A Make-to-Stock System With Both Backorders And Lost Sales

In this dissertation,we analyze the optimal production and unidirectional transshipment policy for a two-location production-inventory system with exponential production and interarrival times.Items can only be transshipped from location 1 with a production facility to location 2 without a production facility.A key feature of our model is that we allow transshipments to be triggered by both demand arrivals and production completions.Thus,transshipment is used to achieve production flexibility through inventory reallocation,as well as to fill emergency demands.At each decision epoch,we must determine whether to produce an item and if so,whether to use this item to increase its own inventory or to reduce backlog or to increase inventory of location 2.At each decision epoch,we must also determine whether to satisfy demand from on-hand inventory,emergency transshipment(location 2),backorder it,or reject it.For the case of Poisson demands and exponential production time,we formulate the problem as a Markov decision process and use this formulation to characterize the structure of the optimal policy.The objective is to minimize the sum of inventory holding cost and the costs of backorders,the cost of preventive and emergency transshipment and lost sales.We show that the optimal policy can be described by two kind of threshold functions that depend on the state of the system.And the threshold levels are monotonic(either nonincreasing or nondecreasing)in the level of inventory.We also characterize analytically the sensitivity of these thresholds to the various cost parameters.