Revisiting Magee’s production smoothing rule

17th EurOMA Annual Conference, Porto, Portugal, 6th-9th June, 10 pages.

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Abstract

Magee (1956) proposes an interesting replenishment policy designed to give some flexibility to control not only inventory and order rates, but also the change in the order rate from period to period. He assumed that not only inventory but also production adaptation costs are important. Our contribution considers how this policy may be applied to ARMA(p,q) demands. Additionally, we also study in some depth, the order variance for ARMA(1,1) demands via an asymptotic analysis and show order variance is either increasing in the smoothing parameter or has, at most, one minimum.