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Process Flexibility: A Distribution-Free Bound on the Performance of k -Chain

Author

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  • Xuan Wang

    (Leonard N. Stern School of Business, New York University, New York, New York 10012)

  • Jiawei Zhang

    (Leonard N. Stern School of Business, New York University, New York, New York 10012; and New York University Shanghai, Shanghai, China 200122)

Abstract

Process flexibility has been widely applied in many industries as a competitive strategy to improve responsiveness to demand uncertainty. An important flexibility concept is the long chain proposed by Jordan and Graves (1995) [Jordan WC, Graves SC (1995) Principles on the benefits of manufacturing process flexibility. Management Sci. 41(4):577–594.]. The effectiveness of the long chain has been investigated via numerical as well as theoretical analysis for specific probability distributions of the random demand. In this paper, we obtain in closed form a distribution-free bound on the ratio of the expected sales of the long chain relative to that of full flexibility. Our bound depends only on the mean and standard deviation of the random demand, but compares very well with the ratio that uses complete information of the demand distribution. This suggests the robustness of the performance of the long chain under different distributions. We also prove a similar result for k -chain, a more general flexibility structure. We further tighten the bounds by incorporating more distributional information of the random demand.

Suggested Citation

  • Xuan Wang & Jiawei Zhang, 2015. "Process Flexibility: A Distribution-Free Bound on the Performance of k -Chain," Operations Research, INFORMS, vol. 63(3), pages 555-571, June.
    • Handle: RePEc:inm:oropre:v:63:y:2015:i:3:p:555-571
    DOI: 10.1287/opre.2015.1370
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