Managing production-inventory systems with scarce resources

We consider the problem of managing production in a production-inventory system where a firm is subject to an allowance (a limit) on either the amount of input it can use or the amount of output it can produce over a specified compliance period (in addition to being subject to a constraint on the pr...

Full description

Saved in:
Bibliographic Details
Main Authors: BENJAAFAR, Saif, CHEN, David, WANG, Rowan
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2017
Subjects:
Online Access:https://ink.library.smu.edu.sg/lkcsb_research/4555
https://ink.library.smu.edu.sg/context/lkcsb_research/article/5554/viewcontent/Managing_production_inventory_systems_scarce_2016_afv.pdf
https://ink.library.smu.edu.sg/context/lkcsb_research/article/5554/filename/0/type/additional/viewcontent/msom.2016.0603_sm.pdf
Tags: Add Tag
No Tags, Be the first to tag this record!
Institution: Singapore Management University
Language: English
id sg-smu-ink.lkcsb_research-5554
record_format dspace
spelling sg-smu-ink.lkcsb_research-55542019-01-24T01:14:54Z Managing production-inventory systems with scarce resources BENJAAFAR, Saif CHEN, David WANG, Rowan We consider the problem of managing production in a production-inventory system where a firm is subject to an allowance (a limit) on either the amount of input it can use or the amount of output it can produce over a specified compliance period (in addition to being subject to a constraint on the production capacity). Examples of such settings are numerous and include those where limits are placed on the use of scarce natural resources as input or on the amount of waste or harmful pollution generated by production as output. We study the structure of the optimal production policy for such systems and show that it is determined by dynamic thresholds that depend only on the sum of the on-hand inventory level and the remaining allowance. We provide an effective approximate solution approach that can compute these thresholds efficiently while retaining their essential properties. We examine the differences between how an allowance constraint and a constraint on production capacity affect production decisions and show that they exhibit opposite effects over time. We also examine, in the context of an extended version of the problem where both the allowance amount and the production capacity are endogenous, optimal investments in allowance and production capacity and the impact of both on firm profit.We also consider the optimal demand fulfillment policy in settings where the firm can decide whether to back-order or to reject demand that cannot be satisfied from on-hand inventory. 2017-02-01T08:00:00Z text application/pdf https://ink.library.smu.edu.sg/lkcsb_research/4555 info:doi/10.1287/msom.2016.0603 https://ink.library.smu.edu.sg/context/lkcsb_research/article/5554/viewcontent/Managing_production_inventory_systems_scarce_2016_afv.pdf https://ink.library.smu.edu.sg/context/lkcsb_research/article/5554/filename/0/type/additional/viewcontent/msom.2016.0603_sm.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection Lee Kong Chian School Of Business eng Institutional Knowledge at Singapore Management University Production-inventory systems Natural resources and the environment Allowance constraints Capacity constraints Stochastic optimal control Demand fulfillment and rationing Business Operations and Supply Chain Management
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic Production-inventory systems
Natural resources and the environment
Allowance constraints
Capacity constraints
Stochastic optimal control
Demand fulfillment and rationing
Business
Operations and Supply Chain Management
spellingShingle Production-inventory systems
Natural resources and the environment
Allowance constraints
Capacity constraints
Stochastic optimal control
Demand fulfillment and rationing
Business
Operations and Supply Chain Management
BENJAAFAR, Saif
CHEN, David
WANG, Rowan
Managing production-inventory systems with scarce resources
description We consider the problem of managing production in a production-inventory system where a firm is subject to an allowance (a limit) on either the amount of input it can use or the amount of output it can produce over a specified compliance period (in addition to being subject to a constraint on the production capacity). Examples of such settings are numerous and include those where limits are placed on the use of scarce natural resources as input or on the amount of waste or harmful pollution generated by production as output. We study the structure of the optimal production policy for such systems and show that it is determined by dynamic thresholds that depend only on the sum of the on-hand inventory level and the remaining allowance. We provide an effective approximate solution approach that can compute these thresholds efficiently while retaining their essential properties. We examine the differences between how an allowance constraint and a constraint on production capacity affect production decisions and show that they exhibit opposite effects over time. We also examine, in the context of an extended version of the problem where both the allowance amount and the production capacity are endogenous, optimal investments in allowance and production capacity and the impact of both on firm profit.We also consider the optimal demand fulfillment policy in settings where the firm can decide whether to back-order or to reject demand that cannot be satisfied from on-hand inventory.
format text
author BENJAAFAR, Saif
CHEN, David
WANG, Rowan
author_facet BENJAAFAR, Saif
CHEN, David
WANG, Rowan
author_sort BENJAAFAR, Saif
title Managing production-inventory systems with scarce resources
title_short Managing production-inventory systems with scarce resources
title_full Managing production-inventory systems with scarce resources
title_fullStr Managing production-inventory systems with scarce resources
title_full_unstemmed Managing production-inventory systems with scarce resources
title_sort managing production-inventory systems with scarce resources
publisher Institutional Knowledge at Singapore Management University
publishDate 2017
url https://ink.library.smu.edu.sg/lkcsb_research/4555
https://ink.library.smu.edu.sg/context/lkcsb_research/article/5554/viewcontent/Managing_production_inventory_systems_scarce_2016_afv.pdf
https://ink.library.smu.edu.sg/context/lkcsb_research/article/5554/filename/0/type/additional/viewcontent/msom.2016.0603_sm.pdf
_version_ 1770572287690407936