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Sales and operations planning in systems with order configuration uncertainty

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  • Chen-Ritzo, Ching-Hua
  • Ervolina, Tom
  • Harrison, Terry P.
  • Gupta, Barun

Abstract

This paper addresses the problem of aligning demand and supply in configure-to-order systems. Using stochastic programming methods, this study demonstrates the value of accounting for the uncertainty associated with how orders are configured. We also demonstrate the value of component supply flexibility in the presence of order configuration uncertainty. We present two stochastic models: an explosion problem model and an implosion problem model. These models are positioned sequentially within a popular business process called sales and operations planning. Both models are formulated as two-stage stochastic programs with recourse and are solved using the sample average approximation method. Computational analyses were performed using data obtained from IBM System and Technology Group. The problem sets used in our analysis are created from actual industry data and our results show that significant improvements in revenue and serviceability can be achieved by appropriately accounting for the uncertainty associated with order configurations.

Suggested Citation

  • Chen-Ritzo, Ching-Hua & Ervolina, Tom & Harrison, Terry P. & Gupta, Barun, 2010. "Sales and operations planning in systems with order configuration uncertainty," European Journal of Operational Research, Elsevier, vol. 205(3), pages 604-614, September.
    • Handle: RePEc:eee:ejores:v:205:y:2010:i:3:p:604-614
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    References listed on IDEAS

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    1. Feng Cheng & Markus Ettl & Grace Lin & David D. Yao, 2002. "Inventory-Service Optimization in Configure-to-Order Systems," Manufacturing & Service Operations Management, INFORMS, vol. 4(2), pages 114-132, December.
    2. Yingdong Lu & Jing-Sheng Song & David D. Yao, 2003. "Order Fill Rate, Leadtime Variability, and Advance Demand Information in an Assemble-to-Order System," Operations Research, INFORMS, vol. 51(2), pages 292-308, April.
    3. A. A. Tsay & W. S. Lovejoy, 1999. "Quantity Flexibility Contracts and Supply Chain Performance," Manufacturing & Service Operations Management, INFORMS, vol. 1(2), pages 89-111.
    4. Yalçin Akçay & Susan H. Xu, 2004. "Joint Inventory Replenishment and Component Allocation Optimization in an Assemble-to-Order System," Management Science, INFORMS, vol. 50(1), pages 99-116, January.
    5. Jeff Linderoth & Alexander Shapiro & Stephen Wright, 2006. "The empirical behavior of sampling methods for stochastic programming," Annals of Operations Research, Springer, vol. 142(1), pages 215-241, February.
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    Cited by:

    1. Wang, Gang & Gunasekaran, Angappa & Ngai, Eric W.T. & Papadopoulos, Thanos, 2016. "Big data analytics in logistics and supply chain management: Certain investigations for research and applications," International Journal of Production Economics, Elsevier, vol. 176(C), pages 98-110.
    2. Z. Caner Taşkın & Semra Ağralı & A. Tamer Ünal & Vahdet Belada & Filiz Gökten-Yılmaz, 2015. "Mathematical Programming-Based Sales and Operations Planning at Vestel Electronics," Interfaces, INFORMS, vol. 45(4), pages 325-340, August.
    3. Pereira, Daniel Filipe & Oliveira, José Fernando & Carravilla, Maria Antónia, 2022. "Merging make-to-stock/make-to-order decisions into sales and operations planning: A multi-objective approach," Omega, Elsevier, vol. 107(C).
    4. Tavares Thomé, Antônio Márcio & Scavarda, Luiz Felipe & Fernandez, Nicole Suclla & Scavarda, Annibal José, 2012. "Sales and operations planning: A research synthesis," International Journal of Production Economics, Elsevier, vol. 138(1), pages 1-13.
    5. Pereira, Daniel Filipe & Oliveira, José Fernando & Carravilla, Maria Antónia, 2020. "Tactical sales and operations planning: A holistic framework and a literature review of decision-making models," International Journal of Production Economics, Elsevier, vol. 228(C).
    6. Noroozi, Sayeh & Wikner, Joakim, 2017. "Sales and operations planning in the process industry: A literature review," International Journal of Production Economics, Elsevier, vol. 188(C), pages 139-155.
    7. Tobias Kreuter & Luiz Felipe Scavarda & Antonio Márcio Tavares Thomé & Bernd Hellingrath & Marcelo Xavier Seeling, 2022. "Empirical and theoretical perspectives in sales and operations planning," Review of Managerial Science, Springer, vol. 16(2), pages 319-354, February.
    8. Ben Ali, M. & D’Amours, S. & Gaudreault, J. & Carle, M-A., 2018. "Configuration and evaluation of an integrated demand management process using a space-filling design and Kriging metamodeling," Operations Research Perspectives, Elsevier, vol. 5(C), pages 45-58.
    9. Tuomikangas, Nina & Kaipia, Riikka, 2014. "A coordination framework for sales and operations planning (S&OP): Synthesis from the literature," International Journal of Production Economics, Elsevier, vol. 154(C), pages 243-262.
    10. João Rampon Neto & Paulo Fernando Pinto Barcellos, 2023. "Challenges of Implementing S&OP in a Mid-sized Automotive Components Company: An Action Research Approach," Systemic Practice and Action Research, Springer, vol. 36(5), pages 755-782, October.

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