Managing finished-goods inventory under capacitated delayed differentiation
Delayed differentiation or postponement is widely advocated to mitigate conflicts between product diversity and inventory cost savings. Manufacturers practicing postponement often suffer from severely constrained finishing capacities and noticeable finishing lead times. Therefore, inventories are still needed for finished products. Using the concept of inventory shortfall, this paper studies base-stock inventory models with and without demand forecasting and provides a computationally efficient method to set optimal inventory targets for finished products under capacitated postponement. Computations show inventory-saving benefit quickly vanishes after the capacity reaches a certain level. The value of forecasted advance-demand information (ADI) to postponement is justified, but can easily be overstated. Finishing capacities usually force manufacturers to build ahead according to demand forecast. When capacity limitation becomes severe, intuitions often guide producers to build to forecast even more than finishing lead times ahead. Results of this research indicate that these intuitions may be invalid and build to forecast more than finishing lead times ahead may not be a good practice. Further studies reveal that under capacitated postponement the forecasted advance-demand information is useful only when the variance of demand forecast errors is less than that of demands, and show that the optimal forecast lead time can be obtained in the same way as if the capacity is unlimited.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 39 (2011)
Issue (Month): 5 (October)
|Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/375/description#description|
|Order Information:|| Postal: http://www.elsevier.com/wps/find/supportfaq.cws_home/regional|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hau L. Lee & Kut C. So & Christopher S. Tang, 2000. "The Value of Information Sharing in a Two-Level Supply Chain," Management Science, INFORMS, vol. 46(5), pages 626-643, May.
- Hallgren, Mattias & Olhager, Jan, 2009. "Flexibility configurations: Empirical analysis of volume and product mix flexibility," Omega, Elsevier, vol. 37(4), pages 746-756, August.
- Li Chen & Hau L. Lee, 2009. "Information Sharing and Order Variability Control Under a Generalized Demand Model," Management Science, INFORMS, vol. 55(5), pages 781-797, May.
- Chen, F., 1999.
"Market Segmentation, Advanced Demand Information and Supply Chain Performance,"
99-2, Columbia - Graduate School of Business.
- Fangruo Chen, 2001. "Market Segmentation, Advanced Demand Information, and Supply Chain Performance," Manufacturing & Service Operations Management, INFORMS, vol. 3(1), pages 53-67, February.
- Jayashankar M. Swaminathan & Sridhar R. Tayur, 1998. "Managing Broader Product Lines through Delayed Differentiation Using Vanilla Boxes," Management Science, INFORMS, vol. 44(12-Part-2), pages S161-S172, December.
- Guillermo Gallego & Özalp Özer, 2001. "Integrating Replenishment Decisions with Advance Demand Information," Management Science, INFORMS, vol. 47(10), pages 1344-1360, October.
- 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.
- Rema Hariharan & Paul Zipkin, 1995. "Customer-Order Information, Leadtimes, and Inventories," Management Science, INFORMS, vol. 41(10), pages 1599-1607, October.
- Chen, Liang-Hsuan & Chen, Ying-Che, 2010. "A multiple-item budget-constraint newsboy problem with a reservation policy," Omega, Elsevier, vol. 38(6), pages 431-439, December.
- Gregory A. DeCroix & Antonio Arreola-Risa, 1998. "Optimal Production and Inventory Policy for Multiple Products Under Resource Constraints," Management Science, INFORMS, vol. 44(7), pages 950-961, July.
When requesting a correction, please mention this item's handle: RePEc:eee:jomega:v:39:y:2011:i:5:p:481-492. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.