Chen, Y. F. and Disney, Stephen Michael  ORCID: https://orcid.org/0000-0003-2505-9271
2007.
The myopic Order-Up-To policy with a proportional feedback controller.
International Journal of Production Research
45
(2)
, pp. 351-368.
10.1080/00207540600579532
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Abstract
We develop a discrete control theory model of a myopic Order-Up-To (OUT) policy reacting to a stochastic demand pattern with Auto Regressive and Moving Average (ARMA) components. We show that the bullwhip effect arises with such a policy despite the fact that it is optimal when the ordering cost is linear. We then derive a set of z-transform transfer functions of a modified OUT policy that allows us to avoid the bullwhip problem by incorporating a proportional controller into the inventory position feedback loop. With this technique, the order variation can always be reduced to the same level as the demand variation. However, bullwhip-effect avoidance always comes at the cost of holding extra inventory. When the ordering cost is piece-wise linear and increasing, we compare the total cost per period under the two types of control policies: with and without bullwhip-effect reduction. Numerical examples reveal that the cost saving can be substantial if the order variance is reduced by using the proportional controller.
| Item Type: | Article |
|---|---|
| Date Type: | Publication |
| Status: | Published |
| Schools: | Schools > Business (Including Economics) Research Institutes & Centres > Centre for Advanced Manufacturing Systems At Cardiff (CAMSAC) |
| Subjects: | H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management |
| Uncontrolled Keywords: | Bullwhip effect; Inventory; Order-Up-To policy; Control theory |
| Publisher: | Taylor & Francis |
| ISSN: | 0020-7543 |
| Date of First Compliant Deposit: | 30 March 2016 |
| Last Modified: | 28 Nov 2024 13:15 |
| URI: | https://orca.cardiff.ac.uk/id/eprint/42382 |
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