Creating an Inventory Hedge for Markov-Modulated Poisson Demand: An Application and Model

@article{Abhyankar2001CreatingAI,
  title={Creating an Inventory Hedge for Markov-Modulated Poisson Demand: An Application and Model},
  author={Hari S. Abhyankar and Stephen C. Graves},
  journal={Manufacturing & Service Operations Management},
  year={2001},
  volume={3},
  pages={306-320}
}
Many firms face environments with long production lead times, great product variety, and uncertain, non-stationary demand. A challenge is how to plan production and inventories to provide competitive customer service at least cost. In this paper, we first describe an application at Teradyne in which we implemented an inventory hedge to protect against cyclic demand variability. Based on this experience, we develop a model to understand better the efficacy of this hedging policy. We model an… CONTINUE READING