Optimal Planning Quantities for Product Transition
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li_planning product transition_final_version.pdf
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306.71 KB
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Adobe PDF
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ecac448e2a7673ffb865c81609754963
Author(s)
Li, Hongmin
Graves, Stephen C.
Rosenfield, Donald B.
Date Issued
October 2009
Journal
Production and Operations Management
Publisher
Wiley Blackwell (Blackwell Publishing)
Citation
Li, H., Graves, S. C. and Rosenfield, D. B. (2010), Optimal Planning Quantities for Product Transition. Production and Operations Management, 19: 142–155. doi: 10.1111/j.1937-5956.2009.01091.x
Version
Author's final manuscript
Abstract
The replacement of an existing product with a new one presents many challenges. In particular, uncertainties in a new product introduction often lead to extreme cases of demand and supply mismatches. This paper addresses inventory planning decisions for product upgrades when there is no replenishment opportunity during the transition period. We allow product substitution: when a company runs out of the old product, a customer may be offered the new product as a substitute. We show that the optimal substitution decision is a time-varying threshold policy and establish the optimal planning policy. Further, we determine the optimal delay in a new product introduction, given the initial inventory of the old product.
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution-Noncommercial-Share Alike 3.0
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DOI of Published Version
https://doi.org/10.1111/j.1937-5956.2009.01091.x
