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Production planning with variable demand

Author

Listed:
  • Bard, JF
  • Moore, JT

Abstract

This paper presents an expanded version of the dynamic inventory model in which customer behavior is explicitly addressed. The intent is to give production planners a means of accounting for the inexact nature of demand as it varies over some mathematically defined set. The proposed model takes the form of a two-person, nonzero sum game or bilevel program. The manufacturer is considered the leader and announces a production mix and advertising strategy for the planning horizon. Using this information, the customer then tries to structure a response that will satisfy his demand at minimum cost. A basic property of the model is that the manufacturer can influence the choices available to the customer through advertising, but cannot control them. Both players try to maximize their individual objectives without violating the constraints of the system. Due to the inherent conflict in the game, this may give rise to non-Pareto-optimal solutions. Nevertheless, we feel that the approach offers new insight into the relationship between production planning and marketing, and offers management a powerful mechanism for coordinating inter-departmental activities. Results from a case study are presented to illustrate a number of these points.

Suggested Citation

  • Bard, JF & Moore, JT, 1990. "Production planning with variable demand," Omega, Elsevier, vol. 18(1), pages 35-42.
  • Handle: RePEc:eee:jomega:v:18:y:1990:i:1:p:35-42
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    References listed on IDEAS

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    1. Richard Ehrhardt, 1979. "The Power Approximation for Computing (s, S) Inventory Policies," Management Science, INFORMS, vol. 25(8), pages 777-786, August.
    2. Richard Ehrhardt & Charles Mosier, 1984. "A Revision of the Power Approximation for Computing (s, S) Policies," Management Science, INFORMS, vol. 30(5), pages 618-622, May.
    3. Arthur F. Veinott, Jr. & Harvey M. Wagner, 1965. "Computing Optimal (s, S) Inventory Policies," Management Science, INFORMS, vol. 11(5), pages 525-552, March.
    4. Eliezer Naddor, 1975. "Optimal and Heuristic Decisions in Single-and Multi-Item Inventory Systems," Management Science, INFORMS, vol. 21(11), pages 1234-1249, July.
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    Cited by:

    1. Jolayemi, Joel K. & Olorunniwo, Festus O., 2004. "A deterministic model for planning production quantities in a multi-plant, multi-warehouse environment with extensible capacities," International Journal of Production Economics, Elsevier, vol. 87(2), pages 99-113, January.
    2. Polyxeni-Margarita Kleniati & Claire Adjiman, 2014. "Branch-and-Sandwich: a deterministic global optimization algorithm for optimistic bilevel programming problems. Part I: Theoretical development," Journal of Global Optimization, Springer, vol. 60(3), pages 425-458, November.

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