Production and inventory rationing in a make-to-stock system with a failure-prone machine and lost sales

Edwin Tai Chiu Cheng, Chunyan Gao, Houcai Shen

Research output: Journal article publicationJournal articleAcademic researchpeer-review

13 Citations (Scopus)


We consider production and inventory rationing of a product to fulfill multiple demand classes in a make-to-stock production system with a failure-prone machine. Demand that cannot be satisfied immediately is lost and incurs a lost sales cost, which differs from class to class. We find that the optimal control policies under both the expected total discounted cost criterion and the average cost criterion have similar structural properties. Specifically, the optimal production policy is the base-stock policy and the optimal inventory allocation policy is the threshold control policy with machine-state-dependent threshold levels. Finally, we provide numerical examples to show the importance of taking machine failures into consideration and the effectiveness of the optimal control policy.
Original languageEnglish
Article number5692814
Pages (from-to)1176-1180
Number of pages5
JournalIEEE Transactions on Automatic Control
Issue number5
Publication statusPublished - 1 May 2011


  • Machine failures
  • multiclass demands
  • optimal control

ASJC Scopus subject areas

  • Electrical and Electronic Engineering
  • Control and Systems Engineering
  • Computer Science Applications

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