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Capacity Allocation for Dynamic Process Improvement with Quality and Demand Considerations

Author

Listed:
  • Suresh Chand

    (Purdue University, West Lafayette, Indiana)

  • Herbert Moskowitz

    (Purdue University, West Lafayette, Indiana)

  • Andreas Novak

    (University of Vienna, Vienna, Austria)

  • Ishpal Rekhi

    (Purdue University, West Lafayette, Indiana)

  • Gerhard Sorger

    (University of Vienna, Vienna, Austria)

Abstract

Management of process improvement activities is an essential part of the manufacturing strategy of a firm to remain globally competitive in the long run. This paper considers a manufacturing environment where process improvement activities require use of the productive capacity of the firm in addition to other investments. Thus the firm must allocate its productive capacity between production activities and improvement activities. The output of production activities is used to meet customer demand. Process improvement activities improve the quality of the output, which in turn leads to lower quality related costs (both internal and external) and possibly lower per-unit production cost. It is assumed that the demand function is downward sloping and that revenue is a concave function of output. A continuous-time, finite-horizon, profit maximization, resource allocation model is developed to find an optimal time path for process improvement activities and production activities. Computational results are provided to study the effect of various problem parameters on the optimal decisions.

Suggested Citation

  • Suresh Chand & Herbert Moskowitz & Andreas Novak & Ishpal Rekhi & Gerhard Sorger, 1996. "Capacity Allocation for Dynamic Process Improvement with Quality and Demand Considerations," Operations Research, INFORMS, vol. 44(6), pages 964-975, December.
  • Handle: RePEc:inm:oropre:v:44:y:1996:i:6:p:964-975
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    File URL: http://dx.doi.org/10.1287/opre.44.6.964
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    Cited by:

    1. repec:spr:joptap:v:170:y:2016:i:1:d:10.1007_s10957-015-0855-0 is not listed on IDEAS
    2. repec:eee:ejores:v:277:y:2019:i:3:p:1037-1045 is not listed on IDEAS
    3. repec:spr:annopr:v:264:y:2018:i:1:d:10.1007_s10479-017-2649-2 is not listed on IDEAS
    4. Fouad El Ouardighi & Konstantin Kogan, 2013. "Dynamic conformance and design quality in a supply chain: an assessment of contracts’ coordinating power," Annals of Operations Research, Springer, vol. 211(1), pages 137-166, December.

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