Yield randomness, cost tradeoffs and diversification in the EOQ model.

*(English)*Zbl 0693.90032Summary: 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.

PDF
BibTeX
XML
Cite

\textit{Y. Gerchak} and \textit{M. Parlar}, Nav. Res. Logist. 37, No. 3, 341--354 (1990; Zbl 0693.90032)

Full Text:
DOI

##### References:

[1] | Gerchak , Y. Parlar , M. Vickson , R. G. ”A Single Period Production Model with Uncertain Output and Demand,” Proceedings of the 25th IEEE Conference on Decision and Control 1986 1733 1736 |

[2] | Gerchak, ”Periodic Review Production Models with Variable Yield and Uncertain Demand,”, IIE Transactions 20 pp 144– (1988) |

[3] | Hayya, ”Reducing Inventory Uncertainty: A Reorder Point System,”, Production and Inventory Management 28 pp 43– (1987) |

[4] | Henig , M. Gerchak , Y. ”The Structure of Periodic Review Policies in the Presence of Random Yield,” Operations Research · Zbl 0721.90034 |

[5] | Ilan , Y. Yadin , M. ”Second Sourcing and Transfer of Technology-Tradeoffs under Uncertainty,” 1985 |

[6] | Kalro, ”A Lot Size Model with Backlogging when the Amount Ordered Is Uncertain,”, International Journal of Production Research 20 pp 775– (1982) |

[7] | Kelle, ”Safety Stock Reduction by Order Splitting,” (1988) · Zbl 0721.90033 |

[8] | Lee, ”Production Control in Multi-Stage Systems with Variable Yield Losses,”, Operations Research 36 pp 269– (1988) · Zbl 0642.90046 |

[9] | Levy, Portfolio and Investment Selection: Theory and Practice (1984) |

[10] | Mazzola, ”Algorithms and Heuristics for Variable Yield Lot Sizing,”, Naval Research Logistics Quarterly 34 pp 67– (1987) · Zbl 0609.90032 |

[11] | Moinzadeh, ”A Continuous Review Inventory Model with Constant Resupply Time and Defective Items,”, Naval Research Logistics 34 (1987) · Zbl 0651.90017 |

[12] | Porteus, ”Investing in Reduced Setups in the EOQ Model,”, Management Science 31 pp 998– · Zbl 0609.90058 |

[13] | Rosenblatt, ”Economic Production Cycles with Imperfect Production Processes,”, IIE Transactions 18 pp 48– (1986) |

[14] | Ross, Stochastic Processes (1983) |

[15] | Shih, ”Optimal Inventory Policies when Stockouts Results from Defective Products,”, International Journal of Production Research 18 pp 677– (1980) |

[16] | Silver, ”Establishing the Order Quantity when the Amount Received Is Uncertain,”, INFOR 14 pp 32– (1976) |

[17] | Spence , A. M. ”Yield Variability in Manufacturing: Rework and Scrap Policies,” 1988 |

[18] | Zhang , X. Gerchak , Y. ”Joint Lot Sizing and Inspection Policy in an EOQ Model with Variable Yield,” IIE Transactions |

This reference list is based on information provided by the publisher or from digital mathematics libraries. Its items are heuristically matched to zbMATH identifiers and may contain data conversion errors. It attempts to reflect the references listed in the original paper as accurately as possible without claiming the completeness or perfect precision of the matching.