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The Optimality of Hedging Point Policies for Stochastic Two-Product Flexible Manufacturing Systems

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  • Chen Shaoxiang

    (Nanyang Business School, Nanyang Technological University, Singapore 639797)

Abstract

This paper studies the stochastic two-item, periodic review, single facility, flexible manufacturing systems, where stochasticity comes from random demands or/and unreliable production process. Based on a notion called (mu) -difference monotone introduced in this paper, we prove that the hedging point policy is optimal to the systems in general for both finite and infinite horizon cases of the problems. This result is (demand) distribution free and does not require strict convexity or even differentiability of the one-period expected cost function. A general characterization of the hedging point policy, together with monotone switching curves, is provided.

Suggested Citation

  • Chen Shaoxiang, 2004. "The Optimality of Hedging Point Policies for Stochastic Two-Product Flexible Manufacturing Systems," Operations Research, INFORMS, vol. 52(2), pages 312-322, April.
    • Handle: RePEc:inm:oropre:v:52:y:2004:i:2:p:312-322
    DOI: 10.1287/opre.1030.0087
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    References listed on IDEAS

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    Cited by:

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    2. Hyun-Soo Ahn & Stefanus Jasin & Philip Kaminsky & Yang Wang, 2018. "Analysis of Deterministic Control and Its Improvements for an Inventory Problem with Multiproduct Batch Differentiation," Operations Research, INFORMS, vol. 66(1), pages 58-78, 1-2.
    3. Shrutivandana Sharma & Hossein Abouee‐Mehrizi & Giorgio Sartor, 2020. "Inventory Management under Storage and Order Restrictions," Production and Operations Management, Production and Operations Management Society, vol. 29(1), pages 101-117, January.
    4. Ganesh Janakiraman & Mahesh Nagarajan & Senthil Veeraraghavan, 2018. "Simple Policies for Managing Flexible Capacity," Manufacturing & Service Operations Management, INFORMS, vol. 20(2), pages 333-346, May.
    5. Xiting Gong & Xiuli Chao, 2013. "Technical Note---Optimal Control Policy for Capacitated Inventory Systems with Remanufacturing," Operations Research, INFORMS, vol. 61(3), pages 603-611, June.
    6. Stephanie Carew & Mahesh Nagarajan & Steven Shechter & Jugpal Arneja & Erik Skarsgard, 2021. "Dynamic Capacity Allocation for Elective Surgeries: Reducing Urgency-Weighted Wait Times," Manufacturing & Service Operations Management, INFORMS, vol. 23(2), pages 407-424, March.

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