Optimal production lot size under backup agreement allowing substitute products
| Autor: | Chih-Hsiung Wang, Wen-Chin Tsai |
|---|---|
| Rok vydání: | 2020 |
| Předmět: |
021103 operations research
Operations research Computer science Fashion industry 0211 other engineering and technologies Substitute good Purchase cost 02 engineering and technology Management Science and Operations Research Economic production quantity Profit (economics) Manufacturing cost Computer Science Applications Theoretical Computer Science Supply and demand 03 medical and health sciences 0302 clinical medicine Backup 030221 ophthalmology & optometry |
| Zdroj: | RAIRO - Operations Research. 54:1309-1326 |
| ISSN: | 1290-3868 0399-0559 |
| DOI: | 10.1051/ro/2019047 |
| Popis: | In the fashion industry, a flexible backup agreement contract allows the retailer to order a partial amount from the backup quantity to allay the risk of uncertain market demand. However, under such a contract, the manufacturer faces the risk of bearing a huge leftover if the quantity realized by the retailer in backup is small. Accordingly, the present study considers a modified backup agreement in which the manufacturer is permitted to urgently purchase substitute products to satisfy the backup order from a third-party supplier, but at a unit purchase cost greater than the original unit manufacturing cost. The corresponding expected total profit function for the manufacturer is established and shown to be concave. The profit function is used to explore various useful properties for determining the optimal production lot size. In addition, an illustrated numerical example is provided to analyze the impact of the backup contract terms on the optimal production lot size and manufacturer’s profit. |
| Databáze: | OpenAIRE |
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