Good buy? Delaying end-of-life purchases

Good buy? Delaying end-of-life purchases

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Article ID: iaor20042625
Country: Netherlands
Volume: 146
Issue: 1
Start Page Number: 216
End Page Number: 228
Publication Date: Jan 2003
Journal: European Journal of Operational Research
Authors: ,
Keywords: inventory
Abstract:

We study the effects of delaying an end-of-life buy. Manufacturerers sometimes are required to place a final, end-of-life buy for a component that the supplier will no longer provide. The manufacturer performs a newsvendor analysis with the possible result of significant expected overage and underage costs. If the decision can be delayed, the expected overage and underage costs can be reduced. We model the effects of a delay of the final purchase under various scenarios of remaining demand. We contrast the manufacturing benefits with the costs incurred by the supplier and show that the supplier, who benefits greatly from the end-of-life buy, likely will require an incentive to enact a delay. Our results provide an insight to the observation of increasing numbers of end-of-life buys and provide a framework for analysis as manufacturers strive to cope with the issue.

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