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Analysis of postponement strategy by EPQ-based models with planned backorders


  • Li, Jian
  • Wang, Shouyang
  • Cheng, T.C. Edwin


This paper develops economic production quantity (EPQ)-based models with planned backorders to evaluate the impact of the postponement strategy on a manufacturer in a supply chain. We derive the optimal total average costs per unit time for producing and keeping n end-products in a postponement system and a non-postponement system, respectively. By comparing the optimal total average costs of the two systems, we evaluate the impact of postponement on the manufacturer under four circumstances. Our results show that postponement strategy can give a lower total average cost under certain circumstances. We also find that the key factors in postponement decisions are the variance of the machine utilization rates and the variance of the backorder costs.

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  • Li, Jian & Wang, Shouyang & Cheng, T.C. Edwin, 2008. "Analysis of postponement strategy by EPQ-based models with planned backorders," Omega, Elsevier, vol. 36(5), pages 777-788, October.
  • Handle: RePEc:eee:jomega:v:36:y:2008:i:5:p:777-788

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    References listed on IDEAS

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    2. Ma, Shihua & Wang, Wei & Liu, Liming, 2002. "Commonality and postponement in multistage assembly systems," European Journal of Operational Research, Elsevier, vol. 142(3), pages 523-538, November.
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    5. Li, Suhong & Ragu-Nathan, Bhanu & Ragu-Nathan, T.S. & Subba Rao, S., 2006. "The impact of supply chain management practices on competitive advantage and organizational performance," Omega, Elsevier, vol. 34(2), pages 107-124, April.
    6. Ernst, Ricardo & Kamrad, Bardia, 2000. "Evaluation of supply chain structures through modularization and postponement," European Journal of Operational Research, Elsevier, vol. 124(3), pages 495-510, August.
    7. Ronald, Robert & Yang, Gino K. & Chu, Peter, 2004. "Technical note: The EOQ and EPQ models with shortages derived without derivatives," International Journal of Production Economics, Elsevier, vol. 92(2), pages 197-200, November.
    8. Cardenas-Barron, Leopoldo Eduardo, 2001. "The economic production quantity (EPQ) with shortage derived algebraically," International Journal of Production Economics, Elsevier, vol. 70(3), pages 289-292, April.
    9. Eilon, Samuel, 1985. "Multi-product batch production on a single machine--A problem revisited," Omega, Elsevier, vol. 13(5), pages 453-468.
    10. S. K. Goyal, 1974. "Determination of Optimum Packaging Frequency of Items Jointly Replenished," Management Science, INFORMS, vol. 21(4), pages 436-443, December.
    11. Yossi Aviv & Awi Federgruen, 2001. "Capacitated Multi-Item Inventory Systems with Random and Seasonally Fluctuating Demands: Implications for Postponement Strategies," Management Science, INFORMS, vol. 47(4), pages 512-531, April.
    12. Goyal, Suresh K. & Satir, Ahmet T., 1989. "Joint replenishment inventory control: Deterministic and stochastic models," European Journal of Operational Research, Elsevier, vol. 38(1), pages 2-13, January.
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    Cited by:

    1. Pentico, David W. & Drake, Matthew J. & Toews, Carl, 2009. "The deterministic EPQ with partial backordering: A new approach," Omega, Elsevier, vol. 37(3), pages 624-636, June.
    2. Wang, John & Yan, Ruiliang & Hollister, Kimberly & Zhu, Dan, 2008. "A historic review of management science research in China," Omega, Elsevier, vol. 36(6), pages 919-932, December.
    3. Javad Sadeghi & Seyed Taghi Akhavan Niaki & Mohammad Reza Malekian & Saeid Sadeghi, 2016. "Optimising multi-item economic production quantity model with trapezoidal fuzzy demand and backordering: two tuned meta-heuristics," European Journal of Industrial Engineering, Inderscience Enterprises Ltd, vol. 10(2), pages 170-195.
    4. Pasandideh, Seyed Hamid Reza & Niaki, Seyed Taghi Akhavan & Nobil, Amir Hossein & Cárdenas-Barrón, Leopoldo Eduardo, 2015. "A multiproduct single machine economic production quantity model for an imperfect production system under warehouse construction cost," International Journal of Production Economics, Elsevier, vol. 169(C), pages 203-214.
    5. Kevin Hsu, Wen-Kai & Yu, Hong-Fwu, 2009. "EOQ model for imperfective items under a one-time-only discount," Omega, Elsevier, vol. 37(5), pages 1018-1026, October.
    6. Pan, Kewen & Lai, K.K. & Liang, L. & Leung, Stephen C.H., 2009. "Two-period pricing and ordering policy for the dominant retailer in a two-echelon supply chain with demand uncertainty," Omega, Elsevier, vol. 37(4), pages 919-929, August.


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