Production Point Optimization with Service Level Constraints

An optimizing model for studying production- inventory policy with service level constraints is proposed. To realize the integrative decision of service level and production point, the service level in a supply chain is defined as the probability of satisfying product demand in each planning period. Inventory variation under stochastic demand is analyzed, and the average inventory in each planning period is invited into the decision model. The planning outputs in each period are stochastic variables having the same distribution with the product demand. A numerical analysis is given to validate the approach.