Perturbation analysis for continuous and discrete flow models: a study of the delivery time impact on the optimal buffer level

In this paper, a manufacturing system composed of a single-product machine, a buffer and a stochastic demand is considered. Two models are presented: continuous and discrete flow models including constant delivery times, machine failures and random demands. The objective is to determine the value of the optimal buffer level, for a hedging point policy which minimises the total average cost function. The cost function is the sum of inventory, transportation and lost sales costs. Infinitesimal perturbation analysis is used for optimisation of the failure-prone manufacturing system. The trajectories of buffer level are studied for the continuous and discrete cases and the infinitesimal perturbation analysis estimators are evaluated. These estimators are shown to be unbiased and then they are implemented in an optimisation algorithm which determines the optimal buffer level in the presence of constant delivery time. Numerical results are presented for continuous and discrete flow models and then compared in o...