EconPapers    
Economics at your fingertips  
 

Product recall timing optimization using dynamic programming

Liufang Yao and Mahmut Parlar

International Journal of Production Economics, 2019, vol. 210, issue C, 1-14

Abstract: In this paper we treat the optimal timing of product recall decisions as a dynamic process with defect rate as a random variable. We first develop an optimal stopping model where the defect rate is a beta random variable that is constant across all periods. We solve the problem using stochastic dynamic programming (DP) and develop thresholds for optimal stopping based on the observed value of the number of returns as a state variable. We then extend the model where the beta defect rate random variable is revised using Bayesian updating in each period after observing the number of product returns from the preceding period. Employing the conjugate property of the beta and binomial, we again solve the problem as a stochastic DP and determine the thresholds based on the values of the state vector with three variables. We show that for the more general version, the computational difficulty increases dramatically with problem size. For this problem we present a simulation optimization approach that selects the best functional form for the threshold curve. Several examples and managerial insights illustrate our findings.

Keywords: Product recall; Dynamic programming; Bayesian updating; Simulation (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0925527319300015
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:210:y:2019:i:c:p:1-14

Access Statistics for this article

International Journal of Production Economics is currently edited by R. W. Grubbström

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

 
Page updated 2019-08-10
Handle: RePEc:eee:proeco:v:210:y:2019:i:c:p:1-14