Dynamic product assembly and inventory control for maximum profit

12 years 11 months ago

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We consider a manufacturing plant that purchases raw materials for product assembly and then sells the final products to customers. There are M types of raw materials and K types of products, and each product uses a certain subset of raw materials for assembly. The plant operates in slotted time, and every slot it makes decisions about re-stocking materials and pricing the existing products in reaction to (possibly timevarying) material costs and consumer demands. We develop a dynamic purchasing and pricing policy that yields time average profit within of optimality, for any given > 0, with a worst case storage buffer requirement that is O(1/ ). The policy can be implemented easily for large M, K, yields fast convergence times, and is robust to non-ergodic system dynamics.

Michael J. Neely, Longbo Huang

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