Naval Research Logistics (NRL) · 1990 · 132 citations · 13 references
ManagementDecision SciencesOperations ManagementDiversification StrategyInventory ManagementProduction PlanningStochastic Inventory ModelsYield ManagementDual SourcingLot Size AnalysisRandom Yield ModelsStochastic Inventory Cost ModelsSupplier DiversificationSupply Chain Diversification
Existing production/inventory models assume a given yield distribution when yield is random. The study seeks to jointly determine optimal yield randomness and lot sizing decisions. The authors analyze an EOQ model that simultaneously selects yield variance and lot size under two cost structures, and examine source diversification to reduce yield randomness while weighing its costs. They derive conditions under which diversification between two distinct sources outperforms a single source, determine the optimal number of identical sources, and discuss alignment with recent JIT practices.
Abstract Existing production/inventory models with random (variable) yield take the yield distribution as given. This work takes a step towards selecting the optimal yield randomness, jointly with lot sizing decisions. First, we analyze an EOQ model where yield variance and lot size are to be selected simultaneously. Two different cost structures are considered. Secondly, we consider source diversification (‘second sourcing’) as a means of reducing effective yield randomness, and trade its benefits against its costs. Conditions for the superiority of diversification between two sources with distinct yield distributions over a single source are derived. The optimal number of identical sources is also analyzed. Some comments on the congruence of the results with recent JIT practices are provided.
13
Investing in Reduced Setups in the EOQ Model
Evan L. Porteus · Management Science · 1985 · 438 citations
Management, Industrial Engineering, Operations Management +17