IDEAS home Printed from https://ideas.repec.org/a/spr/annopr/v126y2004i1p71-10110.1023-banor.0000012276.87248.c7.html
   My bibliography  Save this article

On the Effect of Product Variety in Production–Inventory Systems

Author

Listed:
  • Saif Benjaafar
  • Joon-Seok Kim
  • N. Vishwanadham

Abstract

In this paper, we examine the effect of product variety on inventory costs in a production–inventory system with finite capacity where products are made to stock and share the same manufacturing facility. The facility incurs a setup time whenever it switches from producing one product type to another. The production facility has a finite production rate and stochastic production times. In order to mitigate the effect of setups, products are produced in batches. In contrast to inventory systems with exogenous lead times, we show that inventory costs increase almost linearly in the number of products. More importantly, we show that the rate of increase is sensitive to system parameters including demand and process variability, demand and capacity levels, and setup times. The effect of these parameters can be counterintuitive. For example, we show that the relative increase in cost due to higher product variety is decreasing in demand and process variability. We also show that it is decreasing in expected production time. On the other hand, we find that the relative cost is increasing in expected setup time, setup time variability and aggregate demand rate. Furthermore, we show that the effect of product variety on optimal base stock levels is not monotonic. We use the model to draw several managerial insights regarding the value of variety-reducing strategies such as product consolidation and delayed differentiation. Copyright Kluwer Academic Publishers 2004

Suggested Citation

  • Saif Benjaafar & Joon-Seok Kim & N. Vishwanadham, 2004. "On the Effect of Product Variety in Production–Inventory Systems," Annals of Operations Research, Springer, vol. 126(1), pages 71-101, February.
    • Handle: RePEc:spr:annopr:v:126:y:2004:i:1:p:71-101:10.1023/b:anor.0000012276.87248.c7
    DOI: 10.1023/B:ANOR.0000012276.87248.c7
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1023/B:ANOR.0000012276.87248.c7
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1023/B:ANOR.0000012276.87248.c7?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Xiao, Tiaojun & Xu, Tiantian, 2014. "Pricing and product line strategy in a supply chain with risk-averse players," International Journal of Production Economics, Elsevier, vol. 156(C), pages 305-315.
    2. Van Nieuwenhuyse, Inneke & Vandaele, Nico & Rajaram, Kumar & Karmarkar, Uday S., 2007. "Buffer sizing in multi-product multi-reactor batch processes: Impact of allocation and campaign sizing policies," European Journal of Operational Research, Elsevier, vol. 179(2), pages 424-443, June.
    3. Lyons, Andrew Charles & Um, Juneho & Sharifi, Hossein, 2020. "Product variety, customisation and business process performance: A mixed-methods approach to understanding their relationships," International Journal of Production Economics, Elsevier, vol. 221(C).
    4. Carlos Chaves & Abhijit Gosavi, 2022. "On general multi-server queues with non-poisson arrivals and medium traffic: a new approximation and a COVID-19 ventilator case study," Operational Research, Springer, vol. 22(5), pages 5205-5229, November.
    5. Huang, Shui-Mu & Su, Jack C.P., 2013. "Impact of product proliferation on the reverse supply chain," Omega, Elsevier, vol. 41(3), pages 626-639.
    6. Robert N. Boute & Marc R. Lambrecht & Benny Van Houdt, 2007. "Performance evaluation of a production/inventory system with periodic review and endogenous lead times," Naval Research Logistics (NRL), John Wiley & Sons, vol. 54(4), pages 462-473, June.
    7. Noblesse, Ann M. & Boute, Robert N. & Lambrecht, Marc R. & Van Houdt, Benny, 2014. "Lot sizing and lead time decisions in production/inventory systems," International Journal of Production Economics, Elsevier, vol. 155(C), pages 351-360.
    8. Menezes, Mozart B.C. & Jalali, Hamed & Lamas, Alejandro, 2021. "One too many: Product proliferation and the financial performance in manufacturing," International Journal of Production Economics, Elsevier, vol. 242(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:annopr:v:126:y:2004:i:1:p:71-101:10.1023/b:anor.0000012276.87248.c7. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.