A thesis summitted in partial fulfillment of the requirements for the degree of Master of Engineering, School of Engineering and Technology

Thesis (M.Eng.) - Asian Institute of Technology, 1988

This study explores the methods available to protect Material Requirement s Planning (MRP ) or related systems when t here is uncertainty associated with the system. These are multi -stage production systems . The demand for the end item is stochastic and stationary. This leads to buffer stocks in the form of safety stock and safety lead time . A careful survey of recent literature in this area is made to highlight the computati0nally feasible and promising approaches available. One of the important development due to Lambrecht and Muckstadt concern a serial production system under periodic review . Their numerical evidence indicates that optimal inventory control policies, found by Markovian Decision Process (MOP) (with multi- dimensional state space) turns out to yield (S,s) policies for control of echelon inventories. The MDP gets infeasible for large lead times and/or several production stages. For that situation Lambrecht and Muckstadt have proposed a modification to Clark and Scarf approach based on regarding echelon stocks as sing l e stage inventories; wherein they have done away with the penalty function computation in Clark and Scarf method . Moreover t hey have explored the possibility of quantity co-ordination between stages, whose motivation comes from deterministic models. I n this study we examine for condition specified by Lambrecht and Muckstadt for deciding whether or not to employ quantity co- ordination. The numerical evidence in this study indicates that the basic modification of Cl ark and Scarf policy due to Lambrecht and Muckstadt gives close to optimal results, the condition