The effect of work in process information on the dynamic performance of an integrated inventory-production system

Stock level has undeniable effects on the performance of every inventory-production system. Work in process (WIP) inventory is one type of stock that is equal to unfinished goods after first and before last step of production within manufacturing line. Although higher levels of WIP has a negative impact on the cost structure of the supply chain, but its existence is a necessary condition to have smooth production without blockage or starvation. Beside its operational consequences on the manufacturing line, the incorporation of WIP information in the ordering policy has critical side effects on the inventory and production swings and thus on the performance criteria of the system. In this paper we investigate the influence of utilization of WIP information usage on the dynamic behavior of an inventory-production system subject to market demand fluctuations with different frequencies. A sensitivity analysis is applied to discover how production quantity and inventory levels alter by changing time to adjust WIP errors in a control theoretic model of a manufacturing system. The most remarkable result of our analysis is that despite hardness of WIP level acquisition, more incorporation of such information in the production ordering rules has a positive impact on the production and inventory levels of the system especially for highly fluctuated demands.