Evaluation of the Impact of Uncertain Advance Demand Information on Production/Inventory Systems

In this paper, we conduct a simulation study to evaluate the impact of using imperfect advance demand information (ADI) in a single stage production/inventory system. We mean by ADI the fact that the production system receives customer orders in advance of their due-dates. We consider four types of ADI: 1) Perfect ADI, 2) ADI with imperfect due-dates, 3) ADI with imperfect demand quantities and 4) ADI with updates. The production system is controlled by a modified base-stock policy which has two parameters that are S, the base-stock level, and L, the production release lead time. We intend to shed light on the impact of imperfect ADI (ADI types 2, 3, 4) on the performance of production/inventory systems. The aim of the simulation study is twofold. Firstly, the objective is to find the optimal parameters of the modified base-stock policy and secondly, to evaluate the benefits of imperfect ADI in a production/inventory system.