Control of inventory system with random demand and product damage during delivery using the linear quadratic gaussian method

Abstract

This study formulates a dynamical system for the control of a single product inventory system in accordance with the random value of demand and the percentage of damaged product during the delivery process. The formulated model has the form of a linear state-space system comprising of two disturbances, which represents the random value of demand and the percentage of the damaged product during delivery. The optimal value of the product amount ordered to the supplier is properly calculated by using the linear quadratic gaussian (LQG) method. The controller is used by the manager to make inventory level decisions under the uncertainty of demand and damaged items during the product delivery process. The result showed that the optimal product order for each review time was achieved, and the inventory level was used to obtain the right set point properly. Moreover, based on comparison with other research results, the proposed model was well performed.