Optimal Control of High-Volume Assemble-to-Order Systems with Delay Constraints

Erica L. Plambeck and Amy R. Ward
Additional contact information
Erica L. Plambeck: Stanford U
Amy R. Ward: Georgia Institute of Technology

Research Papers from Stanford University, Graduate School of Business

Abstract: We consider an assemble-to-order system with a high volume of prospective customers arriving per unit time. A companion paper established that with optimal product prices, component production capacity, and sequencing of orders for assembly, the system can be approximated by a diffusion process with dimension equal to the number of components (rather than the number of components plus the number of products). This state space collapse allows us to incorporate product-specific delay constraints and dynamic control of component inventory. First, we choose product prices, component production capacities, and propose a discrete review policy for expediting components and sequencing orders for assembly that satisfies delay constraints perfectly, and is asymptotically optimal when expediting is very costly. We also propose a simpler version of this policy, based on the backlog of demand for each component, that asymptotically complies with delay guarantees and achieves the same limiting expected discounted profit. Second, we numerically solve an approximating diffusion control problem for systems with both expediting and salvaging of components, and highlight useful structural properties.

Date: 2005-01
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://gsbapps.stanford.edu/researchpapers/detail1.asp?Document_ID=2670
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to gsbapps.stanford.edu:443 (certificate verify failed) (http://gsbapps.stanford.edu/researchpapers/detail1.asp?Document_ID=2670 [302 Found]--> https://gsbapps.stanford.edu/researchpapers/detail1.asp?Document_ID=2670)

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:ecl:stabus:1891

Access Statistics for this paper

More papers in Research Papers from Stanford University, Graduate School of Business Contact information at EDIRC.
Bibliographic data for series maintained by ().