Dean H. Kropp

Lead-time setting, capacity utilization, and pricing decisions under lead-time dependent demand

This research examines the lead-time setting, capacity utilization, and pricing decisions facing a firm serving customers that are sensitive to quoted lead-times. We model the firms operations as an M/M/1 queue and treat the demand as being linear in price and quoted lead-time. We analyze the quoted lead-time, capacity utilization, and price that maximize revenues less total variable production costs, WIP holding costs, and lateness penalty costs. We use this analysis to show that the capacity utilization should be lower when (1) customers are more sensitive to lead-times and/or (2) the firm incurs higher congestion related costs and/or (3) the penalty for lateness is higher. Further, we study the robustness of optimal profit contributions when the model parameters are mis-estimated.

The single period stochastic plant layout problem

Abstract In this paper we present an optimal solution procedure for the single period stochastic plant layout problem. The procedure only requires solving a “deterministic” from-to flow matrix. This “deterministic” matrix is a weighted-average of all from-to flow matrices. Since it may be difficult to estimate the probabilities of occurrence of the various states of nature, we developed a simulation model to test the robustness of our approach. For over 26,000 problems examined, the average error of using our approach was very small, only about one-sixth of one percent. Handled by the Department of Facilities Design/Material Handling.

Effective and simple EOQ-like solutions for stochastic demand periodic review systems

Abstract In this paper we examine a periodic review system under stochastic demand with variable stockout costs. The optimal values for cycle length and amount of safety stock are difficult to obtain because one of the First Order Conditions does not have a closed form solution. However, by using a Taylor series expansion to approximate part of the cost function, we produce a simple cost function structure which is similar to that of deterministic models. We argue that this simple structure is also beneficial to promote the solution in other problems where coordination of cycles is required. To illustrate, we use the joint replenishment problem for multiple items under stochastic demand and suggest simple and efficient solution procedures.

Periodic review and joint replenishment in stochastic demand environments

In this paper we consider periodic review systems under stochastic demands. First, we study the single product periodic review problem and propose a simple solution procedure which is near optimal. Then, given the existence of this simple procedure, we study the joint replenishment problem for multiple items under stochastic demands and suggest simple heuristics which provide very good results. We find the simple procedures combined with the robustness of the cost function to be very attractive in other applications which require coordination of cycle times under stochastic demands.

VOLUME AND CAPACITY INTERACTION IN FACILITY DESIGN

Abstract This paper addresses the joint facilities design problem of determining both demand and capacity with stochastic demand arrivals and stochastic processing throughput. Using a simple M/M/1 queueing model of a profit maximizing firm, we link marketing and production decision variables by recognizing appropriate congestion costs, and show that coordinated decision-making provides results superior to making demand and capacity decisions sequentially. Sensitivity analysis indicates that the model is robust with respect to its assumptions and parameters. An example illustrates the approach and demonstrates the application of the model.

The New Manufacturing Challenge: Techniques for Continuous ImprovementThe New Manufacturing Challenge: Techniques for Continuous Improvement, by SuzakiKiyoshi. New York: Free Press, 1987, 270 pp.,

The article presents a review of the book “The New Manufacturing Challenge: Techniques for Continuous Improvement,” by Kiyoshi Suzaki.

24.95, cloth.

The article presents a review of the book “Managing Quality: The Strategic and Competitive Edge,” by David A. Garvin.