Integrated capacity and inventory decisions

N. P. Dellaert (), S. D. P. Flapper (), T. Tan () and J. Jeunet ()
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N. P. Dellaert: Technische Universiteit Eindhoven
S. D. P. Flapper: Technische Universiteit Eindhoven
T. Tan: Technische Universiteit Eindhoven
J. Jeunet: University Paris-Dauphine

A chapter in Operations Research Proceedings 2011, 2012, pp 463-468 from Springer

Abstract: Abstract This paper deals with the simultaneous acquisition of capacity and material in a situation with uncertain demand, with non-zero lead-times for the supply of both material and capacity. Although there is a lot of literature on the time-phased acquisition of capacity and material, most of this literature focuses on one of the two decisions. By using a dynamic programming formulation, we describe the optimal balance between using safety stocks and contingent workforce for various lead-time situations. We compare the cost ingredients of the optimal strategy with the standard inventory approach that neglects capacity restrictions in the decision. The experimental study shows that co-ordination of both decisions in the optimal strategy leads to cost reductions of around 10%.We also derive characteristics of the optimal strategy that we expect to provide a thorough basis for operational decision making.

Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:spr:oprchp:978-3-642-29210-1_74

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DOI: 10.1007/978-3-642-29210-1_74

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