Stochastic modeling in inventory and production control

Business and Economics

About this course

Students from other TU/e bachelors than Industrial Engineering lack basic knowledge about topics such as production and inventory control and the theory of probability and stochastics. This course covers a range of topics that are highly recommended to study in preparation for the courses that are offered in the OML and MSE master program. On the one hand this course exists of an introduction to a number of mathematical techniques/areas such as probability theory, Markov chains, queueing theory and renewal theory. These techniques are introduced in the available reader for the course and can be practiced with the associated exercises. Additional explanation can be obtained through watching available video lectures/material. On the other hand, we give a brief introduction into a few main topics in Operations Management, which are assumed to be known in the master phase. We discuss the solution of inventory problems in situations of both certain and uncertain demand. Furthermore, we treat dynamic lotsizing heuristics that optimize cases with varying demand. Finally, we give a brief introduction into production control methods. The acquired knowledge can be seen as a first toolbox that contains methods and techniques to be used to solve simple logistic company problems. The exercises of this course contain multiple examples of such problems and require you to solve them. The course is fully based on self study. Students are supposed to study the topics themselves and practice with the available material. For further questions the students is expected to be able to find relevant scientific literature independently, possibly using the provided academic sources.

Expected learning outcomes

After finishing this course, students will be able to:

• Use the basics of probability theory to deduce insights in problems with uncertainty.

• Use Markov chains and Markov processes to solve simple problems in which they can be applied.

• Calculate performance characteristics of basic queues using queueing theory.

• Explain under which circumstances renewal theory can be applied and show what are the advantages of doing so.

• Model basic inventory problems and calculate what is the optimal solution for problems with a known constant future demand.

• Model an inventory problem with demand uncertainty and calculate the minimum cost.

• Apply the important heuristics and solutions in the area of dynamic lotsizing and production control for easy problem instances.