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This report proposes a method of estimating the amount of safety stock needed in each station of a production line due to variation in processing times, machine breakdowns and demand fluctuation in order to meet a predetermined desired level of performance. The production line is assumed to operate as a pull system and the measure of performance is the average percentage of demand backlogged. Multiple machines and different batch sizes in the stations are included in the model. Dynamic production control is used and is based on the current inventory level in every station of the system. Simulation results are used to test the performance of the system in which the maximum inventory level allowed in each station is based on the estimation given by our method.
So et al. (1988) studied this question.