Haresh Gurnani

Supply management in assembly systems with random yield and random demand

Abstract In this paper, we consider an assembly system where a firm faces random demand for a finished product which is assembled using two critical components. The components are procured from the suppliers who, due to production yield losses, deliver a random fraction of the order quantity. We formulate the exact cost function where the decision variables are the target level of finished products to assemble, and the order quantity of the components from the suppliers. Since the exact cost function is analytically complex to solve, we introduce a modified cost function and derive bounds on the difference in the objective function values. Using the modified cost function, we determine the combined component ordering and production (assembly) decisions for the firm. The benefit of coordinating ordering and assembly decisions is numerically demonstrated by comparing the results with two heuristic policies commonly used in practice. In an extension to the model, we consider the case when the firm has the added option of ordering both the components in a set from a joint supplier. First, we consider the case when the joint supplier is reliable in delivery and obtain dominance conditions on the suppliers to be chosen. The maximum price a firm would be willing to pay to ensure reliable supply of components is determined. Later, we consider the uncertainty in the deliveries from the joint supplier and determine conditions under which there is no diversification, that is, either the individual suppliers are used, or the joint supplier is used, but never both.

Optimal order policies in assembly systems with random demand and random supplier delivery

In this paper we consider an assembly problem where two critical components are required for assembly of the final product, the demand for which is stochastic. The components can be ordered separat...

A study of quantity discount pricing models with different ordering structures: Order coordination, order consolidation, and multi-tier ordering hierarchy

Abstract In this paper, we study quantity discount pricing models with different ordering structures in a system consisting of a single supplier and heterogeneous buyers. We start with the case where the ordering schedule of the buyers is not coordinated and determine the optimal parameters that minimize the joint (system) costs. Later, we consider the case where the discount policy is structured such that the buyers are encouraged to coordinate the timing of their orders. For the case of identical buyers, we show that order coordination always leads to a reduction in the system costs. However, with heterogeneous buyers, we derive the sufficiency conditions that determine when “order coordination” would be preferable. A numerical example illustrating the benefit of “order coordination” is also presented. Then, we consider the case when the buyers place a combined (single) order with the supplier (referred to as “order consolidation”). It is shown that if the supplier offers the same discounted price (the price offered when the buyers coordinate their orders), the buyers would prefer “order consolidation” over “order coordination”. However, for the supplier, conditions derived indicate that the supplier would prefer that the buyers coordinate their orders. Finally, we consider the case of a multi-tier ordering hierarchy where only one of the buyers (for example, a major wholesaler) places an order from the supplier. The remaining buyers, in turn, place orders only from the major buyer. Optimal ordering decisions are again determined and comparisons made with the case of “order consolidation”.

Control of batch processing systems in semiconductor wafer fabrication facilities

Loading policies for a batch processing machine, i.e. a machine that can process more than one job at a time, when the arrival times of jobs to the machine are uncertain, are described. The motivation for the study is the structure of process flows and the predominance of batch processing systems in a semiconductor wafer fabrication facility. A two stage serial-batch system with the serial stage (e.g. photolithography) feeding the batch (e.g. furnace) is considered. Machines in the serial stage process one job at a time; further, these machines are subject to failure. A control limit policy for loading the batch machine is assumed, i.e. load if the queue length >or=Q, else wait until the number of jobs in queue is at least Q. The basic tradeoffs considered are delay (waiting too long) vs. capacity utilization (loading early with very few jobs). An average cost analysis is done and optimized to compute the critical number Q. In an extension to the basic model, the effect of due dates on the critical number is analyzed. Comparison with simulation results is very encouraging. >

Optimal pricing strategies for internet-based software dissemination

In the recent past, there have been several initiatives by major software companies, such as Microsoft, to lead the industry towards electronic software distribution. In this paper, we use a monopoly pricing model to examine the optimal pricing strategies for ‘selling’ and ‘pay-per-use’ licensing of packaged software over the Internet. Traditionally, software distribution included outright sale as well as short/long term renting. With the Internet fast becoming a prevalent mode for disseminating software, a customer can download and use software on a need-by-need basis. For the software vendor, offering the pay-per-use option to the consumer provides for a steady source of revenue and obviates the need for physical distribution, purchasing and inventory management mishaps. We examine the following issues in this paper: (i) what are the extra benefits to the software vendor for providing the pay-per-use option?; and (ii) does the market size change? The contribution of this paper is to show that pay-per-use is a viable alternative for a large number of customers, and that judicious pricing for pay-per-use is profitable for the software vendor.

Deterministic hierarchical substitution inventory models

In this paper, we consider a deterministic nested substitution problem where there are multiple products which can be substituted one for the other, if necessary, at a certain cost. We consider the case when there are n products, and product j can substitute products j + 1,…,n at certain costs. The trade-off is the cost of storing products (for example, customised products) at a higher inventory holding stage versus the cost of transferring downwards from a lower inventory holding cost (generic product) stage. The standard approach to solving the problem yields an intractable formulation, but by reformulating the problem to determine the optimal run-out times, we are able to determine the optimal order and substitution quantities. Numerical examples showing the effect of various system parameters on the optimal order and substitution policy are also presented.

Global quality management programmes: How to make their implementation more effective and less culture dependent

Abstract In this paper, we present a detailed description of the difference between cultural factors and key system factors for implementation of quality management systems. The findings are drawn from observation of the implementation of quality management programmes in numerous factories (electronics, plastic injection, garments, automobile, steel making, etc.) located in Hong Kong/South China, Brazil, Japan and the US. Moreover, we analyze the failure and success factors for multi-cultural implementations. Based on the analysis, we suggest guidelines for a more effective and less culture-dependent implementation methodology.

Optimal ordering policies in inventory systems with random demand and random deal offerings

Abstract In this paper, we determine the optimal order policies for a firm facing random demand and random deal offerings. In a periodic review setting, a firm may first place an order at the regular price. Later in the period, if a price promotion is offered by the supplier (with a certain probability), the firm may decide to place another order. We consider two models in the paper. In the first model, the firm does not share the cost savings (due to the promotion offered by the supplier) with its own customers, i.e. its demand distribution remains fixed. In the second model, the cost savings are shared with the final customers. As a result, the demand distribution shifts to the right. For both the models, in a dynamic finite-horizon problem, the order policy structure is divided into three regions and is as follows. If the initial inventory level for the firm exceeds a certain threshold level, it is optimal not to order anything. If it is in the medium range, it is optimal to wait for the promotion and order only if it is offered. The order quantity when the promotion is offered has an ‘order up to’ policy structure. Finally, if the inventory level is below another threshold, it is optimal to place an order at the regular price, and to place a second order if the promotion is offered. The low initial inventory level makes it risky to just wait for the promotion to be offered. The sum of the order quantities in this case has an ‘order up to’ structure. Finally, we model the suppliers problem as a Stackelberg game and discuss the motivation for the supplier to offer a promotion for the case of uniform demand distribution for the firm. In the first model (when the firm does not share the cost savings with its customers), we show that it is rarely optimal for the supplier to offer a promotion. In the second model, the supplier may offer a promotion depending on the price elasticity of the product.

Pitfalls in total quality management implementation: The case of a Hong Kong company

The planning phase of a quality management programme is as important as the implementation of the programme because total quality management (TQM) requires the integration of the philosophies, practices, tools, methods and techniques into a coherent plan. This process is further complicated due to the differing management style between the expatriate and local managers in many multinational firms, high employee turnover, and other factors endemic to the Asia-Pacific region. In this paper, we study the process of TQM implementation in the Hong Kong division of a multinational company. Using data collected from interviews and through a questionnaire, we analyse the problems faced in TQM implementation and provide management with corrective recommendations. The contribution of this paper is to discuss the pitfalls in the implementation and to recommend strategies for promoting TQM. Even though the analysis is based on a case study approach, since many of these problems are common to this region, the signific...

Capacity planning under different inspection strategies

Abstract This paper addresses the issue of location of inspection stations along a serial production line. As a function of inspection site, the capacity required to test and repair the parts would vary. The production-inspection model developed provides management with information on such capacity planning issues. It integrates the issues of inspection location, inspection capacity, and production capacity. We consider a two-stage production line and evaluate cases when there are inspection sites after each production stage and when inspection is carried out after the final stage. In the latter case, we find the conditions when the safety stock required to meet the demand is higher. This has managerial implications because the inventory level is not only higher, it is held after the final stage, i.e. has more value added onto it. However, if there are inspection stations after each stage, the capacity required to test and repair the parts is higher. The intent of this work is to provide insights into designing production-inventory systems for the serial model that we consider. We also discuss the generalization of the scope of the two-stage model to an N stage production line. In an extension to the problem, we consider the situation when not all the defectives can be repaired. We extend the basic model by considering the effect of partial scraping of the defectives.