A Dynamic Inventory Control Policy Under Demand, Yield and Lead Time Uncertainties

In this paper, we analyze a single-stage and single-item inventory control system with non-stationary demand and uncertain system parameters. We propose two extensions of a previous work on the dynamic reorder point policy (the (r
_k
, Q) policy). In the first extension, we include three types of uncertainties pertaining to the demand uncertainty, the lead time uncertainty, and the yield uncertainty. We study the impact of these uncertainties on the (r
_k
, Q) policy and we provide an approximation of the optimal parameters of the policy using a sequential approach under a cycle service level constraint. The approximative parameters obtained in this paper are good ones for small values of the variability of uncertainties. In the second extension, we focus on the demand uncertainty. We determine the optimal parameters of the (r
_k
, Q) policy using a sequential approach under a fill rate service level constraint. In the two extensions, we focus on the safety stock parameter and we propose a method to compute it