Multi-Item Multi-Stage Production Inventory Model Using AVaR and Permission Value

Abstract

The diversification and individualization of market needs have led to an increase in the variety of products, allowing customers to customize product specifications. Consequently, there is a shorter delivery time and significant fluctuations in order quantities for each product. These fluctuations promote an increase in demand uncertainty. This study considers a multi-item, multi-stage production, and inventory system for the general manufacturing industry. It employs Average Value-at-Risk (AVaR) and game-theoretic concepts to analyze and estimate the risk of the quantity demanded, proposing an optimal production and inventory system.