IDEAS home Printed from https://ideas.repec.org/a/eee/proeco/v143y2013i2p294-303.html
   My bibliography  Save this article

Tactical inventory and backorder decisions for systems with predictable production yield

Author

Listed:
  • Mart, Turgut
  • Duran, Serhan
  • Bakal, İsmail Serdar

Abstract

We consider a manufacturing system with stochastic demand and predictable production yield. The manufacturer has predetermined prices and limited production capacity in each period. The manufacturer also has the option to save some inventory for future periods even if there is demand in the current period. The demand that is not met is lost or may be backordered for only one period. Our objective is to maximize the expected profit by choosing optimal produce-up-to level (Yt¯⁎), save (St⁎) and backorder quantities (Bt⁎) in each period t. We formulate this problem as a Markov Decision Process where the state of the system is represented by the net inventory and the yield rate. We show that a modified order-up-to policy (Yt¯⁎,St⁎,Bt⁎) is optimal in each period t. We also perform computational analysis to examine the effects of production yield on the optimal decisions.

Suggested Citation

  • Mart, Turgut & Duran, Serhan & Bakal, İsmail Serdar, 2013. "Tactical inventory and backorder decisions for systems with predictable production yield," International Journal of Production Economics, Elsevier, vol. 143(2), pages 294-303.
    • Handle: RePEc:eee:proeco:v:143:y:2013:i:2:p:294-303
    DOI: 10.1016/j.ijpe.2012.01.029
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S092552731200031X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ijpe.2012.01.029?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Awi Federgruen & Aliza Heching, 1999. "Combined Pricing and Inventory Control Under Uncertainty," Operations Research, INFORMS, vol. 47(3), pages 454-475, June.
    2. Yunzeng Wang & Yigal Gerchak, 1996. "Periodic Review Production Models with Variable Capacity, Random Yield, and Uncertain Demand," Management Science, INFORMS, vol. 42(1), pages 130-137, January.
    3. Candace Arai Yano & Hau L. Lee, 1995. "Lot Sizing with Random Yields: A Review," Operations Research, INFORMS, vol. 43(2), pages 311-334, April.
    4. Lap Mui Ann Chan & David Simchi-Levi & Julie Swann, 2006. "Pricing, Production, and Inventory Policies for Manufacturing with Stochastic Demand and Discretionary Sales," Manufacturing & Service Operations Management, INFORMS, vol. 8(2), pages 149-168, January.
    5. Mordechai Henig & Yigal Gerchak, 1990. "The Structure of Periodic Review Policies in the Presence of Random Yield," Operations Research, INFORMS, vol. 38(4), pages 634-643, August.
    6. Srinivas Bollapragada & Thomas E. Morton, 1999. "Myopic Heuristics for the Random Yield Problem," Operations Research, INFORMS, vol. 47(5), pages 713-722, October.
    7. Scarf, Herbert E., 2005. "Optimal inventory policies when sales are discretionary," International Journal of Production Economics, Elsevier, vol. 93(1), pages 111-119, January.
    8. Abraham Grosfeld-Nir & Yigal Gerchak & Qi-Ming He, 2000. "Manufacturing to Order with Random Yield and Costly Inspection," Operations Research, INFORMS, vol. 48(5), pages 761-767, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Han, Guanghua & Dong, Ming & Liu, Shaoxuan, 2014. "Yield and allocation management in a continuous make-to-stock system with demand upgrade substitution," International Journal of Production Economics, Elsevier, vol. 156(C), pages 124-131.
    2. Sanei Bajgiran, Omid & Kazemi Zanjani, Masoumeh & Nourelfath, Mustapha, 2016. "The value of integrated tactical planning optimization in the lumber supply chain," International Journal of Production Economics, Elsevier, vol. 171(P1), pages 22-33.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Qing Li & Shaohui Zheng, 2006. "Joint Inventory Replenishment and Pricing Control for Systems with Uncertain Yield and Demand," Operations Research, INFORMS, vol. 54(4), pages 696-705, August.
    2. Xu, He, 2010. "Managing production and procurement through option contracts in supply chains with random yield," International Journal of Production Economics, Elsevier, vol. 126(2), pages 306-313, August.
    3. Song, Yuyue & Wang, Yunzeng, 2017. "Periodic review inventory systems with fixed order cost and uniform random yield," European Journal of Operational Research, Elsevier, vol. 257(1), pages 106-117.
    4. Kutzner, Sarah C. & Kiesmüller, Gudrun P., 2013. "Optimal control of an inventory-production system with state-dependent random yield," European Journal of Operational Research, Elsevier, vol. 227(3), pages 444-452.
    5. Gel, Esma S. & Salman, F. Sibel, 2022. "Dynamic ordering decisions with approximate learning of supply yield uncertainty," International Journal of Production Economics, Elsevier, vol. 243(C).
    6. Qi Feng, 2010. "Integrating Dynamic Pricing and Replenishment Decisions Under Supply Capacity Uncertainty," Management Science, INFORMS, vol. 56(12), pages 2154-2172, December.
    7. T W Sloan, 2004. "A periodic review production and maintenance model with random demand, deteriorating equipment, and binomial yield," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 55(6), pages 647-656, June.
    8. Wang, Daqin & Tang, Ou & Zhang, Lihua, 2014. "A periodic review lot sizing problem with random yields, disruptions and inventory capacity," International Journal of Production Economics, Elsevier, vol. 155(C), pages 330-339.
    9. Peter Berling & Danja R. Sonntag, 2022. "Inventory control in production–inventory systems with random yield and rework: The unit‐tracking approach," Production and Operations Management, Production and Operations Management Society, vol. 31(6), pages 2628-2645, June.
    10. Kaijie Zhu & Rachel Q. Zhang & Fugee Tsung, 2007. "Pushing Quality Improvement Along Supply Chains," Management Science, INFORMS, vol. 53(3), pages 421-436, March.
    11. Voelkel, Michael A. & Sachs, Anna-Lena & Thonemann, Ulrich W., 2020. "An aggregation-based approximate dynamic programming approach for the periodic review model with random yield," European Journal of Operational Research, Elsevier, vol. 281(2), pages 286-298.
    12. Saurabh Bansal & Mahesh Nagarajan, 2017. "Product Portfolio Management with Production Flexibility in Agribusiness," Operations Research, INFORMS, vol. 65(4), pages 914-930, August.
    13. Woonghee Tim Huh & Mahesh Nagarajan, 2010. "Technical note ---Linear Inflation Rules for the Random Yield Problem: Analysis and Computations," Operations Research, INFORMS, vol. 58(1), pages 244-251, February.
    14. Cheong, Taesu & Song, Sang Hwa, 2013. "The value of information on supply risk under random yields," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 60(C), pages 27-38.
    15. Wen-Ya Wang & Diwakar Gupta, 2014. "Nurse Absenteeism and Staffing Strategies for Hospital Inpatient Units," Manufacturing & Service Operations Management, INFORMS, vol. 16(3), pages 439-454, July.
    16. Panos Kouvelis & Guang Xiao & Nan Yang, 2021. "Role of Risk Aversion in Price Postponement Under Supply Random Yield," Management Science, INFORMS, vol. 67(8), pages 4826-4844, August.
    17. Xu, He & Zuo, Xiaolu & Liu, Zhixue, 2015. "Configuration of flexibility strategies under supply uncertainty," Omega, Elsevier, vol. 51(C), pages 71-82.
    18. Danja Sonntag & Gudrun P. Kiesmüller, 2016. "The shape of the yield and its impact on inventory decisions," 4OR, Springer, vol. 14(4), pages 405-415, December.
    19. Qi Feng & J. George Shanthikumar, 2018. "Supply and Demand Functions in Inventory Models," Operations Research, INFORMS, vol. 66(1), pages 77-91, 1-2.
    20. Sonntag, Danja & Kiesmüller, Gudrun P., 2018. "Disposal versus rework – Inventory control in a production system with random yield," European Journal of Operational Research, Elsevier, vol. 267(1), pages 138-149.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:proeco:v:143:y:2013:i:2:p:294-303. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ijpe .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.