Analysis of a production-inventory system with unreliable production facility

This paper tests the robustness of analytical results on performance measures for a production-inventory system with an unreliable production facility. A basic model is considered which involves a single production machine with constant production rate which operates as long as the accumulated inventory is below a pre-set threshold, and is idle otherwise. The demand process follows a compound Poisson distribution and the operating time of a machine until failure as well as the repair time of a failed machine are assumed to be exponentially distributed. A demand that cannot be fully satisfied from existing inventory takes whatever is available and the rest of the demand is lost. Analytical results exist only for the special case where the order sizes are exponentially distributed. In this paper, a simulation model is built to obtain performance measures for the same production-inventory system facing other demand processes. These results are used to test the robustness of the analytical results to changes in the demand process.