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The value of real time yield information in multi-stage inventory systems – Exact and heuristic approaches

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  • Dettenbach, Marcus
  • Thonemann, Ulrich W.

Abstract

We consider a random yield inventory system, where a company has access to real time information about the actual yield realizations. To contribute to a better understanding of the value of this information, we develop a mathematical model of the inventory system and derive structural properties. We build on these properties to develop an optimal solution approach that can be used to solve small to medium sized problems. To solve large problems, we develop two heuristics. We conduct numerical experiments to test the performances of our approaches and to identify conditions under which real time yield information is particularly beneficial. Our research provides the approaches that are necessary to implement inventory control policies that utilize real time yield information. The results can also be used to estimate the cost savings that can be achieved by using real time yield information. The cost savings can then be compared against the required investments to decide if such an investment is profitable.

Suggested Citation

  • Dettenbach, Marcus & Thonemann, Ulrich W., 2015. "The value of real time yield information in multi-stage inventory systems – Exact and heuristic approaches," European Journal of Operational Research, Elsevier, vol. 240(1), pages 72-83.
    • Handle: RePEc:eee:ejores:v:240:y:2015:i:1:p:72-83
    DOI: 10.1016/j.ejor.2014.06.028
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    References listed on IDEAS

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    Cited by:

    1. Voelkel, Michael A. & Sachs, Anna-Lena & Thonemann, Ulrich W., 2020. "An aggregation-based approximate dynamic programming approach for the periodic review model with random yield," European Journal of Operational Research, Elsevier, vol. 281(2), pages 286-298.
    2. G. P. Kiesmüller & K. Inderfurth, 2018. "Approaches for periodic inventory control under random production yield and fixed setup cost," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 40(2), pages 449-477, March.
    3. Sovan Mitra & Andreas Karathanasopoulos, 2019. "Firm Value and the Impact of Operational Management," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 26(1), pages 61-85, March.
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    5. Sonntag, Danja & Kiesmüller, Gudrun P., 2018. "Disposal versus rework – Inventory control in a production system with random yield," European Journal of Operational Research, Elsevier, vol. 267(1), pages 138-149.

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