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Modeling process-switching decisions under product life cycle uncertainty

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  • Ramasesh, Ranga
  • Tirupati, Devanath
  • Vaitsos, Constantin A.

Abstract

We address the process-switching decision of a firm that adopts a mixed process strategy with respect to a new product in the context of product life cycle uncertainty. A mixed process strategy uses a flexible process in the early stages of the product's life cycle and later switches to a dedicated process to gain cost economies. We present a model that captures uncertainty through alternative life-cycle demand functions to guide the process-switching decision. We develop a dynamic decision rule that can be used with any uncertainty-resolution scheme and demonstrate its application and robustness using an illustrative numerical example.

Suggested Citation

  • Ramasesh, Ranga & Tirupati, Devanath & Vaitsos, Constantin A., 2010. "Modeling process-switching decisions under product life cycle uncertainty," International Journal of Production Economics, Elsevier, vol. 126(2), pages 236-246, August.
  • Handle: RePEc:eee:proeco:v:126:y:2010:i:2:p:236-246
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    4. Trigeorgis, Lenos & Tsekrekos, Andrianos E., 2018. "Real Options in Operations Research: A Review," European Journal of Operational Research, Elsevier, vol. 270(1), pages 1-24.
    5. Folgado, R. & Peças, P. & Henriques, E., 2010. "Life cycle cost for technology selection: A Case study in the manufacturing of injection moulds," International Journal of Production Economics, Elsevier, vol. 128(1), pages 368-378, November.

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