Article ID: | iaor20115550 |
Volume: | 126 |
Issue: | 2 |
Start Page Number: | 236 |
End Page Number: | 246 |
Publication Date: | Aug 2010 |
Journal: | International Journal of Production Economics |
Authors: | Tirupati Devanath, Ramasesh Ranga, Vaitsos Constantin A |
Keywords: | decision: rules |
We address the process‐switching decision of a firm that adopts a mixed process strategy with respect to a new product in the context of product life cycle uncertainty. A mixed process strategy uses a flexible process in the early stages of the product's life cycle and later switches to a dedicated process to gain cost economies. We present a model that captures uncertainty through alternative life‐cycle demand functions to guide the process‐switching decision. We develop a dynamic decision rule that can be used with any uncertainty‐resolution scheme and demonstrate its application and robustness using an illustrative numerical example.