A real-time inventory model to manage variance of demand for decreasing inventory holding cost

- Re-order point transformed into, a time driven model, real-time inventory model.
- Developed real-time inventory model eliminates the safety stock.
- Real-time model is proven to be better by some equations.
- Real-time model is compared with re-order point model by a simulation experiment.

Variance of demand is one of the inevitable problems in the manufacturing environment. Market conditions and competition force companies reducing costs. Different approaches and methods have been developed to remedy these problems. Common points of these approaches are utilizing resources and responding in the shortest time possible. To achieve better inventory management, inventory-holding cost is tried to be decreased under the same service level. Re-order point is arranged dynamically regarding couple of factors in some studies. We try to arrange the re-order point in a time based manner by transforming the re-order point into re-order time, which eliminates the safety stock; and it makes the inventory model real-time.Recent production planning studies focus on real-time planning and dynamic scheduling to increase utilization and robustness. In these studies, real-time data is used for planning, but in most of them manufacturing systems and planning methodology are not transformed into a real-time system approach. The novel aspect of this study is the presentation of a model in which the manufacturing system has been designed as a real-time system that consists of real-time planning activities working with real-time data, and eliminating the safety stock.