Article ID: | iaor2013378 |
Volume: | 141 |
Issue: | 2 |
Start Page Number: | 529 |
End Page Number: | 540 |
Publication Date: | Feb 2013 |
Journal: | International Journal of Production Economics |
Authors: | Chen Jian, Shou Biying, Zhang Juliang |
Keywords: | forecasting: applications, simulation, stochastic processes |
This paper studies the problem of how to coordinate postponed product differentiation and forecast update to improve manufacturing efficiency. We consider a two‐stage model of multiple products with a common component. In stage 1, the manager obtains a prior demand distribution of each product and decides the production quantity of the common component. In stage 2, the demand forecast is updated and the common component is differentiated into various final products. Then the final demand of each product is realized and inventory leftover (shortage) is assessed. We use stochastic programming to model this problem, and propose an optimal bundle‐type algorithm to solve it. Furthermore, we develop some simple and effective approximation algorithms for several special cases. Extensive numerical experiments are conducted to show the effectiveness of the approximation algorithms, to compare the performance between the traditional production model and the postponement production model, and to examine the impact of parameters on the performances of the two systems.