The impact of non-stationary demand and forecasting on a failure-prone manufacturing system

Nan Li, Tung Sun Chan, Sai Ho Chung, Ben Niu

Research output: Chapter in book / Conference proceedingConference article published in proceeding or bookAcademic researchpeer-review

1 Citation (Scopus)


Stationary demand process is mostly an assumption in the problem of production/inventory control. The objective of this paper is to investigate the performance of non-stationary control policy and stationary control policy under the condition of non-stationary demand and to study the impact of forecasting on the system's performance in a failure-prone manufacturing system. The hedging-point-based (HPP) production/inventory control policy is adopted and modified to solve this specific problem. The problem is formed as a dynamic programming model. Non-stationary demand is forecasted using a few time-series forecasting methods. Discrete event simulation, experimental design and response surface method are combined together to simultaneously obtain the optimal lot size and hedging point considering the production cost, inventory cost and setup cost The results show that different forecasting methods produce varies accuracy and excessive forecasting inaccuracy deteriorates the performance of the non-stationary control policy. Non-stationary control policy generally can provide better performance when compared with the traditional stationary one.
Original languageEnglish
Title of host publicationIEOM 2015 - 5th International Conference on Industrial Engineering and Operations Management, Proceeding
ISBN (Electronic)9781479960651
Publication statusPublished - 1 Jan 2015
Event5th International Conference on Industrial Engineering and Operations Management, IEOM 2015 - Hyatt Regency Dubai, Dubai, United Arab Emirates
Duration: 3 Mar 20155 Mar 2015


Conference5th International Conference on Industrial Engineering and Operations Management, IEOM 2015
Country/TerritoryUnited Arab Emirates


  • Failure-prone System
  • Forecasting
  • Optimization
  • Production and Inventory Control
  • Simulation

ASJC Scopus subject areas

  • Industrial and Manufacturing Engineering
  • Management Science and Operations Research

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