We consider a failure-prone manufacturing system with bursty demand arrivals. We prove that the hedging-point policy is optimal for this problem and provide analytical expressions to compute the hedging point. This allows us to compare our exact results to simpler approximations. We also show that our result leads to the solution for the constant demand rate problem, under an appropriate scaling of the demand process. We also provide a necessary and sufficient condition under which the just-in-time (JIT) policy is optimal for the case of linear, absolute value instantaneous cost.
- Diffusion approximations
- Large deviations
ASJC Scopus subject areas
- Control and Systems Engineering
- Computer Science Applications
- Electrical and Electronic Engineering