Construction material safety-stock determination under nonstationary stochastic demand and random supply yield

Hui Lu, Hongwei Wang, Yong Xie, Heng Li

Research output: Journal article publicationJournal articleAcademic researchpeer-review

8 Citations (Scopus)

Abstract

Nonstationary stochastic demand and random supply yield have led to a great challenge in construction material management. Appropriate safety stocks can cope with uncertainty in both demand and supply yield, and improve the construction cost and productivity significantly. But the safety stock is usually determined by planner's experience or rough evaluation in management practice, which results in overstock or understock situations frequently. For changing this situation, this paper focuses on analysis of the stochastic inventory control problem of construction material, and develops a general safety-stock determination approach under nonstationary stochastic demand and random supply yield. Based on the linear-order release rule and modified base-stock definition, the inventory balance equation is developed. Then, a coverage random variable, which incorporates the complete information of outstanding orders, is defined to represent the outflows and inflows to stock over risk periods. Meanwhile, the fixed-point iteration method is adopted to calculate the time-varying safety-stock level under predefined service-level (nonstockout probability) constraint. Finally, a numerical analysis is conducted to investigate the relative performance of the proposed safety-stock approach and days of supply rule. The result demonstrates a considerable service improvement and inventory decrease of the safety-stock approach.
Original languageEnglish
Article number7439764
Pages (from-to)201-212
Number of pages12
JournalIEEE Transactions on Engineering Management
Volume63
Issue number2
DOIs
Publication statusPublished - 1 May 2016

Keywords

  • Construction material
  • inventory control
  • nonstationary stochastic demand
  • random supply yield
  • safety stock

ASJC Scopus subject areas

  • Strategy and Management
  • Electrical and Electronic Engineering

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