Production and lead time quotation under imperfect shop floor information

Cumhur Kaman, Secil Savasaneril and Yasemin Serin

International Journal of Production Economics, 2013, vol. 144, issue 2, 422-431

Abstract: We study the value of shop floor information for a manufacturer that operates under a make-to-stock queue scheme and quotes lead times to arriving customers. Two settings are analyzed where in the first setting the manufacturer is able to perfectly track the shop floor status, and in the second setting the manufacturer makes decisions under imperfect information. Under imperfect information, the problem is modeled as a Partially Observable Markov Decision Process. In the computational analysis, first the impact of information distortion on the policies is analyzed and it is shown that the increased likeliness of observing the true status of the system does not necessarily lead to higher profit. Further numerical analysis shows that as the inaccuracy in the data (range of error) increases, the value of information increases. The value of information is likely to be higher under high holding cost and low traffic. Then, the effect of Make-to-Order (MTO) and Make-to-Stock (MTS) queue schemes, as well as the effect of different lead time quotation schemes on the value of information are evaluated. Under MTO queue scheme shop floor information is more valuable under high traffic intensity, whereas under MTS queue scheme information is more valuable under lower intensity. Finally, the analysis reveals that if a firm quotes more precise lead times, then the need for actual shop floor information increases.

Keywords: Value of information; Production control; Lead time quotation; Policies under imperfect information; Partially observable Markov decision process (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0925527313001266
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:144:y:2013:i:2:p:422-431

DOI: 10.1016/j.ijpe.2013.03.010

Access Statistics for this article

International Journal of Production Economics is currently edited by Stefan Minner

More articles in International Journal of Production Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().