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Analysis of postponement strategy by EPQ-based models with planned backorders

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  • Li, Jian
  • Wang, Shouyang
  • Cheng, T.C. Edwin

Abstract

This paper develops economic production quantity (EPQ)-based models with planned backorders to evaluate the impact of the postponement strategy on a manufacturer in a supply chain. We derive the optimal total average costs per unit time for producing and keeping n end-products in a postponement system and a non-postponement system, respectively. By comparing the optimal total average costs of the two systems, we evaluate the impact of postponement on the manufacturer under four circumstances. Our results show that postponement strategy can give a lower total average cost under certain circumstances. We also find that the key factors in postponement decisions are the variance of the machine utilization rates and the variance of the backorder costs.

Suggested Citation

  • Li, Jian & Wang, Shouyang & Cheng, T.C. Edwin, 2008. "Analysis of postponement strategy by EPQ-based models with planned backorders," Omega, Elsevier, vol. 36(5), pages 777-788, October.
    • Handle: RePEc:eee:jomega:v:36:y:2008:i:5:p:777-788
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    Cited by:

    1. Pentico, David W. & Drake, Matthew J. & Toews, Carl, 2009. "The deterministic EPQ with partial backordering: A new approach," Omega, Elsevier, vol. 37(3), pages 624-636, June.
    2. Weskamp, Christoph & Koberstein, Achim & Schwartz, Frank & Suhl, Leena & Voß, Stefan, 2019. "A two-stage stochastic programming approach for identifying optimal postponement strategies in supply chains with uncertain demand," Omega, Elsevier, vol. 83(C), pages 123-138.
    3. Caliskan Demirag, Ozgun & Xue, Weili & Wang, Jie, 2021. "Retailers’ Order Timing Strategies under Competition and Demand Uncertainty," Omega, Elsevier, vol. 101(C).
    4. Wang, John & Yan, Ruiliang & Hollister, Kimberly & Zhu, Dan, 2008. "A historic review of management science research in China," Omega, Elsevier, vol. 36(6), pages 919-932, December.
    5. Javad Sadeghi & Seyed Taghi Akhavan Niaki & Mohammad Reza Malekian & Saeid Sadeghi, 2016. "Optimising multi-item economic production quantity model with trapezoidal fuzzy demand and backordering: two tuned meta-heuristics," European Journal of Industrial Engineering, Inderscience Enterprises Ltd, vol. 10(2), pages 170-195.
    6. Kevin Hsu, Wen-Kai & Yu, Hong-Fwu, 2009. "EOQ model for imperfective items under a one-time-only discount," Omega, Elsevier, vol. 37(5), pages 1018-1026, October.
    7. Pan, Kewen & Lai, K.K. & Liang, L. & Leung, Stephen C.H., 2009. "Two-period pricing and ordering policy for the dominant retailer in a two-echelon supply chain with demand uncertainty," Omega, Elsevier, vol. 37(4), pages 919-929, August.
    8. Wu, Jun & Du, Gang & Jiao, Roger J., 2021. "Optimal postponement contracting decisions in crowdsourced manufacturing: A three-level game-theoretic model for product family architecting considering subcontracting," European Journal of Operational Research, Elsevier, vol. 291(2), pages 722-737.
    9. Pasandideh, Seyed Hamid Reza & Niaki, Seyed Taghi Akhavan & Nobil, Amir Hossein & Cárdenas-Barrón, Leopoldo Eduardo, 2015. "A multiproduct single machine economic production quantity model for an imperfect production system under warehouse construction cost," International Journal of Production Economics, Elsevier, vol. 169(C), pages 203-214.

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