An optimal product-reconfiguration policy due to order changes |
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Authors: | WE-MIN CHOW |
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Institution: | IBM Corporation , 5600 Cottle Road, San Jose, CA, 95193, USA. |
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Abstract: | Abstract It is not an uncommon problem that a finished product cannot be delivered to its customer due to order change. In many real-life applications, such as rack-mounted computer products, it is possible to reconfigure a product by altering the combination of its components. Therefore, an inventory item, resulting from a cancelled order, can be handled in one of two ways: (1) keep the product in storage for a future order; or (2) send the product back to the manufacturing Door for reconfiguration in accordance with a new order A wise decision can be made by evaluating the trade-off between the inventory cost and the conversion cost. This paper presents an optimization procedure for achieving the minimum-cost solution. The problem is formulated by a quadratic programming model. Under a fairly general condition, the problem can be converted into a standard capacitated transportation problem and, therefore, can be solved efficiently. The cost structure, problem formulation, and solution technique arc discussed. |
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