Method to provide sensitivity information for lost-sale (R, s,S)

Details Method to provide sensitivity information for lost-sale (R, s,S) Method to provide sensitivity information for lost-sale (R, s,S)

1997-09-03

1999-12-21

MacDonald, Allen R.

Data processing: financial, business practice, management, or co

Automated electrical financial or business practice or...

Inventory management

705 10, 705 29, G06F 1760

Patent

active

060062029

ABSTRACT:
Sensitivity information about average lost sales and inventory levels of a lost-sale (s,S) inventory system with respect to the two decision variables s and S is used for "what-if" analysis and optimization of the decision variables. Computer software implements an algorithm that provides sensitivity of average inventory levels as well as average lost sales with respect to changes in s and q(q=S-s) for a lost-sale inventory simulation for any specified demand distribution. The sensitivity information provided is exact when compared to a finite-difference simulation for the case of both discrete and continuous, stationary and non-stationary demands. A finite difference estimate of the sensitivity is obtained by running two simulations where the parameter in question (s or S) differ by a chosen small number, and then calculating the resulting difference in the performance measure of interest, in this case average inventory and lost sales.

REFERENCES:
patent: 5446671 (1995-08-01), Weaver et al.
patent: 5699259 (1997-12-01), Colman et al.
Edward A. Silver and Rein Peterson, Decision Systems for Inventory Management and Production Planning, John Wiley & Sons, pp. 256-260, Mar. 21, 1985.
M. C. Fu and J-Q Hu, "(s,S) inventory systems with random lead times," Probability in the Engineering and Informational Sciences, vol.8, pp. 355-376, Jan. 1994.
P. Glasserman and S. Tayur, "Sensitivity analysis for base-stock levels in multiechelon production-inventory systems," Management Science, vol. 41, No. 2, pp. 263-281, Feb. 1995.
Michael C. Fu, "Sample Path Derivatives For (s,S) Inventory Systems," Operations Research, vol. 42, No. 2, pp.351-364, Apr. 1994.

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