Managing Inventory Over a Short Season: Models with Two Procurement Opportunities
Manufacturing & Service Operations Management
Integrated CE tools for postponed aerospace product and process decisions
Proceedings of the 2006 conference on Leading the Web in Concurrent Engineering: Next Generation Concurrent Engineering
Capacity Allocation and Scheduling in Supply Chains
Operations Research
The value of demand postponement under demand uncertainty
ASM'11 Proceedings of the 5th international conference on Applied mathematics, simulation, modelling
Using information systems to improve energy efficiency: Do smart meters make a difference?
Information Systems Frontiers
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In this paper, we analyze demand postponement as a strategy to handle potential demand surges. Under demand postponement, a fraction of the demands from the "regular" period are postponed and satisfied during a "postponement" period. This permits capacity to be procured to satisfy the postponed demands. A reimbursement per unit is paid to customers whose demands are postponed. The basic idea is that by preempting stockouts through demand postponement, we can reduce overall stockout costs. We formulate and solve a two-stage capacity planning problem under demand postponement. We propose a power range class of distributions to capture the nature of demand surges. We establish the scalability and conjugate properties of the power range distributions under demand postponement, which leads to a tractable analysis of the problem. We analytically solve the problem of determining the optimal regular and postponement period capacities, and the demand splitting rule to minimize the supplier's expected cost. We show that (a) the value of postponement may be significant depending on cost and demand parameters, (b) a postponement strategy may lead to reduced investment in initial capacity, and (c) it may be optimal to do no demand postponement over a range of demands even after observing a higher demand signal. We then relax several model assumptions and provide results for these extensions. We conclude with managerial insights.