Production and Operation Managements Inventory Control Subject to Unknown Demand Prof.JIANG Zhibin Dr.GENG Na Department of Industrial Engineering Management Shanghai Jiao Tong University
Production and Operation Managements Prof. JIANG Zhibin Dr. GENG Na Department of Industrial Engineering & Management Shanghai Jiao Tong University Inventory Control Subject to Unknown Demand
@ Inventory Control Subject to Unknown Demand Contents ·Introduction ·The newsboy model Lot Size-Reorder Point System; Service Level in (Q,R)System;
Inventory Control Subject to Unknown Demand Contents • Introduction • The newsboy model • Lot Size-Reorder Point System; • Service Level in (Q, R) System;
ntroduction Sources of Uncertainties In consumer preference and trends in the market; In the availability and cost of labor and resources; In vendor resupply times; In weather and its effects on operations logistics; Of financial variables such as stock prices and interest rates; Of demand for products and services
Introduction Sources of Uncertainties • In consumer preference and trends in the market; • In the availability and cost of labor and resources; • In vendor resupply times; • In weather and its effects on operations logistics; • Of financial variables such as stock prices and interest rates; • Of demand for products and services
Introduction Uncertainty of a quantity means that we cannot predicate its value in advance. A department store cannot exactly predicate the sales of a particular item on any given day; An airline cannot exactly predicate the number of people that will choose to fly on any given flight. How can these firms choose the number of items to keep in inventory or the number of flights to schedule on any given route? Based on the past experience for planning; Probability distribution is estimated based on historical data; Minimize expected cost or maximize the expected profit when uncertainty is present
Introduction Uncertainty of a quantity means that we cannot predicate its value in advance. • A department store cannot exactly predicate the sales of a particular item on any given day; • An airline cannot exactly predicate the number of people that will choose to fly on any given flight. How can these firms choose the number of items to keep in inventory or the number of flights to schedule on any given route? • Based on the past experience for planning; • Probability distribution is estimated based on historical data; • Minimize expected cost or maximize the expected profit when uncertainty is present
Introduction Some Examples In the economic recession of the early 1990s,some business that relied on direct consumer spending,suffered severe losses. Sears and Macy's department stores,long standing successes in American retail market made poor earning in 1991. e Several retailers enjoyed dramatic successes. Both The Gap and Limited in the fashion business did very well. Wal-Mart Stores continues its ascendancy and surpassed Sear as the largest retailer in the United State. Intelligent inventory management in the face of uncertainty certainly played a key role in the success of these firms
Introduction Some Examples • In the economic recession of the early 1990s, some business that relied on direct consumer spending, suffered severe losses. Sears and Macy’s department stores, long standing successes in American retail market made poor earning in 1991. • Several retailers enjoyed dramatic successes. Both The Gap and Limited in the fashion business did very well. Wal-Mart Stores continues its ascendancy and surpassed Sear as the largest retailer in the United State. • Intelligent inventory management in the face of uncertainty certainly played a key role in the success of these firms