Article ID: | iaor20164679 |
Volume: | 63 |
Issue: | 4 |
Start Page Number: | 823 |
End Page Number: | 839 |
Publication Date: | Aug 2015 |
Journal: | Operations Research |
Authors: | Duenyas Izak, Kapuscinski Roman, Demirel Sleyman |
Keywords: | inventory, combinatorial optimization, control, heuristics |
Consider a firm that produces multiple products on dedicated production lines (stage 1), which are further customized/calibrated on a shared resource (stage 2), common to all products. The dedicated production lines and the shared resource for calibration face capacity uncertainties. The firm holds inventory of products that are not yet calibrated and carries out calibration when an order is received. We analyze a multiperiod inventory model for two products and derive the optimal production policy at stage 1 as well as the optimal allocation of the shared resource to demands at stage 2. For the shared resource, because of its capacity uncertainty, not only the total planned production quantities matter, but also the sequence in which the products are processed. We characterize the optimal allocation of the shared resource and show that the optimal policy keeps the ending inventories of products as close to a so‐called ‘