Robust inventory management under uncertain demand and unreliable delivery channels

Abstract

The paper considers the problem of establishing an efficient supply policy for production-inventory systems in which stock replenishment process is unreliable. In the analyzed setting, the stock at a goods distribution center, used to satisfy uncertain, variable demand is refilled using multiple delivery channels. Due to information distortion, product defects, or improper transportation, the shipments may arrive damaged, or incomplete. The setting is modeled as a time-varying discrete-time system with multiple input-output delays. A new delay compensation mechanism, which provides smooth ordering pattern and ensures closed-loop stability for arbitrary delay, is proposed. Conditions for achieving full satisfaction of the a priori unknown demand are specified and formally proved.