Article ID: | iaor20021720 |
Country: | United States |
Volume: | 48 |
Issue: | 5 |
Start Page Number: | 811 |
End Page Number: | 819 |
Publication Date: | Sep 2000 |
Journal: | Operations Research |
Authors: | Dallery Yves, Karaesmen Fikri, Vericourt Francis de |
Keywords: | production |
We consider the problem of dynamically allocating production capacity between two products to minimize the average inventory and backorder costs per unit time in a make-to-stock single machine system. Using sample path comparisons and dynamic programming, we give a characterization of the optimal hedging point policy for a certain region of the state space. The characterization is simple enough to lead to easily implementable heuristics and provides a formal justification of some of the earlier heuristics proposed.