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Jeppesen Uses a Dynamic-Programming-Based DSS to Manage Inventory

Author

Listed:
  • Elena Katok

    (Department of Management Science and Information Systems, Penn State University, University Park, Pennsylvania 16802)

  • Andrew Lathrop

    (Accenture, Capability Modeling and Simulation, 161 North Clark Street, Chicago, Illinois 60601)

  • William Tarantino

    (Center for Army Analysis, 6001 Goethals Road, Fort Belvoir, Virginia 22060)

  • Susan H. Xu

    (Department of Management Science and Information Systems, Penn State University)

Abstract

We developed a system for managing inventory at Jeppesen Sanderson, Inc., a major provider of aviation-information products. The system determines order quantities for charts used in flight manuals. These charts contain essential safety information that changes frequently, making standard methods for inventory management ineffective. We formulated the problem as a dynamic programming model and developed a simple heuristic-solution procedure for determining order quantities. Based on this procedure, we also developed a decision support system (DSS) and implemented it for 600 of the most expensive Jeppesen charts. The system has been in use since August 1998, generating actual annual cost reductions of over $800,000.

Suggested Citation

  • Elena Katok & Andrew Lathrop & William Tarantino & Susan H. Xu, 2001. "Jeppesen Uses a Dynamic-Programming-Based DSS to Manage Inventory," Interfaces, INFORMS, vol. 31(6), pages 54-65, December.
    • Handle: RePEc:inm:orinte:v:31:y:2001:i:6:p:54-65
    DOI: 10.1287/inte.31.6.54.9638
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    References listed on IDEAS

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    Cited by:

    1. Song, Zhuzhu & Tang, Wansheng & Zhao, Ruiqing & Zhang, Guoqing, 2021. "Inventory strategy of the risk averse supplier and overconfident manufacturer with uncertain demand," International Journal of Production Economics, Elsevier, vol. 234(C).
    2. Yufei Ren & Rachel Croson, 2013. "Overconfidence in Newsvendor Orders: An Experimental Study," Management Science, INFORMS, vol. 59(11), pages 2502-2517, November.
    3. Fleischhacker, Adam J. & Zhao, Yao, 2011. "Planning for demand failure: A dynamic lot size model for clinical trial supply chains," European Journal of Operational Research, Elsevier, vol. 211(3), pages 496-506, June.
    4. Yufei Ren & David Croson & Rachel Croson, 2017. "The overconfident newsvendor," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 68(5), pages 496-506, May.
    5. Herweg, Fabian, 2013. "The expectation-based loss-averse newsvendor," Economics Letters, Elsevier, vol. 120(3), pages 429-432.
    6. Gary E. Bolton & Elena Katok, 2008. "Learning by Doing in the Newsvendor Problem: A Laboratory Investigation of the Role of Experience and Feedback," Manufacturing & Service Operations Management, INFORMS, vol. 10(3), pages 519-538, September.

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