A simple approach for identifying an optimal service level for minimizing schedule nervousness under non-stationary stochastic demand

Abstract

Schedule Nervousness occurs when there is a revision in a planned schedule due to an uncertainty in demand. This is because in reality, a future demand is not a deterministic with, a stationary trend, but a non-stationary stochastic demand. A higher inventory service level may lower the probability that actual demand will exceed the inventory, but expected total cost, also inclined as the service level increased. So the objective of this paper is to propose a simple approach for identifying an optimal service level between expected total cost, and nervousness. First, the cost, of operating in a nervousness-five operation was revealed by solving a mixed integer linear programming under static-dynamic uncertainty in a determined set of service levels. The second part provides a proposal of a new simple formulation for identifying an optimal service level between expected total cost, and nervousness based on the findings in the first part. Finally, a similar approach was taken for an experiment, by using a case study in one of the most, nervousness sensitive industries, the airline catering industry. The results were found to be satisfied in both, generated data and the case study.