A Method of Determining Production Load and Size of Inventories when Demand is Variable

One of the more complex problems in a manufacturing organization is that of determining production load and inventories needed to satisfy variable demand. It will be shown that sometimes a relationship between the average demand (μ) and the standard deviation (σ) expressed as σ = kμ² can be used in a multi-product system to determine inventory levels and capacity required for a production-warehouse system. Models for several production-warehouse systems will be developed. An application of the method to a linen control system will be described.