| Summary: | Inventory systems may be analyzed using techniques which
were originally devised to study the dynamic response of servomechanisms.
This paper uses these methods to study an inventory
system using exponential smoothing to predict a demand which is
assumed to have a linear trend with uncorrelated noise components.
The statistical properties of the estimator are investigated, and
both exact and limiting expressions for its mean and variance are
derived. The model is assumed to have a fixed time lag between
the placing of a replenishment order and its receipt, and the
system response is determined for impulse, step and ramp inputs.
The choice of a smoothing constant is discussed, and the effect
of the choice on the variance of the forecast equation, and the
response time of the system is analyzed.
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