Postponed Product Differentiation with Demand Information Update

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Int. J. Production Economics 141 (2013) 529–540

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Int. J. Production Economics
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Postponed product differentiation with demand information update$ Juliang Zhang a, Biying Shou b,n, Jian Chen c
a b c

Department of Logistics Management, School of Economics and Management, Beijing Jiaotong University, Beijing 100044, China Department of Management Sciences, City University of Hong Kong, Hong Kong S.A.R., China Department of Management Science and Engineering, School of Economics and Management, Tsinghua University, Beijing 100084, China

a r t i c l e i n f o
Article history: Received 5 December 2011 Accepted 4 September 2012 Available online 28 September 2012 Keywords: Postponed differentiation Information update Production planning Stochastic programming

This paper studies the problem of how to coordinate postponed product differentiation and forecast update to improve manufacturing efficiency. We consider a two-stage model of multiple products with a common component. In stage 1, the manager obtains a prior demand distribution of each product and decides the production quantity of the common component. In stage 2, the demand forecast is updated and the common component is differentiated into various final products. Then the final demand of each product is realized and inventory leftover (shortage) is assessed. We use stochastic programming to model this problem, and propose an optimal bundle-type algorithm to solve it. Furthermore, we develop some simple and effective approximation algorithms for several special cases. Extensive numerical experiments are conducted to show the effectiveness of the approximation algorithms, to compare the performance between the traditional production model and the postponement production model, and to examine the impact of parameters on the performances of the two systems. & 2012 Elsevier B.V. All rights...
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