On Production and Subcontracting Strategies for Manufacturers with Limited Capacity and Backlog-Dependent Demand
We study a manufacturing firm that builds a product to stock to meet a random demand. If there is a positive surplus of finished goods, the customers make their purchases without delay and leave. If there is a backlog, the customers are sensitive to the quoted lead time and some choose not to order...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | en_US |
| Published: |
Massachusetts Institute of Technology, Operations Research Center
2004
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| Online Access: | http://hdl.handle.net/1721.1/5315 |
| _version_ | 1826213472165167104 |
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| author | Tan, Barli Gershwin, Stanley B. |
| author_facet | Tan, Barli Gershwin, Stanley B. |
| author_sort | Tan, Barli |
| collection | MIT |
| description | We study a manufacturing firm that builds a product to stock to meet a random demand. If there is a positive surplus of finished goods, the customers make their purchases without delay and leave. If there is a backlog, the customers are sensitive to the quoted lead time and some choose not to order if they feel that the lead time is excessive. A set of subcontractors, who have different costs and capacities, are available to supplement the firm's own production capacity. We derive a feedback policy that determines the production rate and the rate at which the subcontractors are requested to deliver products. The performance of the system when it is managed according to this policy is evaluated. The subcontractors represent a set of capacity options, and we calculate the values of these options. |
| first_indexed | 2024-09-23T15:49:45Z |
| format | Working Paper |
| id | mit-1721.1/5315 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T15:49:45Z |
| publishDate | 2004 |
| publisher | Massachusetts Institute of Technology, Operations Research Center |
| record_format | dspace |
| spelling | mit-1721.1/53152019-04-12T08:07:45Z On Production and Subcontracting Strategies for Manufacturers with Limited Capacity and Backlog-Dependent Demand Tan, Barli Gershwin, Stanley B. We study a manufacturing firm that builds a product to stock to meet a random demand. If there is a positive surplus of finished goods, the customers make their purchases without delay and leave. If there is a backlog, the customers are sensitive to the quoted lead time and some choose not to order if they feel that the lead time is excessive. A set of subcontractors, who have different costs and capacities, are available to supplement the firm's own production capacity. We derive a feedback policy that determines the production rate and the rate at which the subcontractors are requested to deliver products. The performance of the system when it is managed according to this policy is evaluated. The subcontractors represent a set of capacity options, and we calculate the values of these options. 2004-05-28T19:33:16Z 2004-05-28T19:33:16Z 2001-05 Working Paper http://hdl.handle.net/1721.1/5315 en_US Operations Research Center Working Paper;OR 354-01 3748918 bytes application/pdf application/pdf Massachusetts Institute of Technology, Operations Research Center |
| spellingShingle | Tan, Barli Gershwin, Stanley B. On Production and Subcontracting Strategies for Manufacturers with Limited Capacity and Backlog-Dependent Demand |
| title | On Production and Subcontracting Strategies for Manufacturers with Limited Capacity and Backlog-Dependent Demand |
| title_full | On Production and Subcontracting Strategies for Manufacturers with Limited Capacity and Backlog-Dependent Demand |
| title_fullStr | On Production and Subcontracting Strategies for Manufacturers with Limited Capacity and Backlog-Dependent Demand |
| title_full_unstemmed | On Production and Subcontracting Strategies for Manufacturers with Limited Capacity and Backlog-Dependent Demand |
| title_short | On Production and Subcontracting Strategies for Manufacturers with Limited Capacity and Backlog-Dependent Demand |
| title_sort | on production and subcontracting strategies for manufacturers with limited capacity and backlog dependent demand |
| url | http://hdl.handle.net/1721.1/5315 |
| work_keys_str_mv | AT tanbarli onproductionandsubcontractingstrategiesformanufacturerswithlimitedcapacityandbacklogdependentdemand AT gershwinstanleyb onproductionandsubcontractingstrategiesformanufacturerswithlimitedcapacityandbacklogdependentdemand |