József Vörös

The dynamics of price, quality and productivity improvement decisions

Abstract Although quality has received significant attention during the last decades and its economic benefits are beyond any doubt, lots of questions have remained unanswered as to how much, when, and in what to invest to maintain sustainable competitive advantage. A model is introduced here to guide a firm in addressing these questions. The firm produces a single product and operates in a market where monopolistic competition is effective. Demand for the product in the industry depends on both price and performance quality. Increasing productivity knowledge decreases unit production cost, but demand for the company’s product decreases over time, as competitors will be able to offer products with similar performance. Productivity and quality knowledge can be developed through induced and autonomous learning in order to strengthen company position. The paper provides an optimal control formulation of the problem and develops necessary conditions for optimality and characterizes the dynamics of optimal price, quality and investment decisions.

Product balancing under conditions of quality inflation, cost pressures and growth strategies

Abstract This paper analyzes an organization that has a well-defined strategy providing a sustainable competitive advantage. This advantage is expressed by at least one dimension of quality on which the product or service exhibits outstanding performance. Using decreasing and increasing exponential demand functions for price and quality, respectively, the optimal quality level is characterized when dollar sales volume (under a cost-based price floor) and profit are maximized. However, as quality inflates, the same quality performance is worth less tomorrow than today. This paper shows that continuous and simultaneous improvement of operational efficiency and quality is a must and is independent from price setting policies. The condition of optimal trade-offs among quality dimensions is found for the case when the company competes on multiple quality dimensions. Finally, the conditions are analyzed when the resources of quality are utilized in other market segments as well. It is found that the corporate level quality (or the utilization level of resources) is lower (higher) than the highest (least) individual business unit (product) quality.

Lot sizing with quality improvement and setup time reduction

In this paper we develop a model that considers process quality improvement and setup cost reduction. The distinctive characteristics of our model are embodied in the assumptions that production rate is finite and cost of attaining close to zero setup time is not infinite. Additionally, the process layout makes possible spotting problems at the place of appearance and these problems can be fixed. The outcome of our analysis under these assumptions supports the popular operations paradigm that reducing response time and increasing process reliability are parallel processes.

Economic order and production quantity models without constraint on the percentage of defective items

The paper deals with a version of the economic order and production quantity models when the fraction of defective items is probability variable that either may vary from cycle to cycle, or remains the same as it was in the first period. We drop the well-known assumption intended to avoid shortages, and two lot sizing rules are derived. Relationships between the new and known lot sizing rules are analyzed and cases are identified when lot sizing rules give significantly different results.

On the stability region for multi-level inventory problems '<

This paper focuses on analysing the multi-stage assembly system with cost function, which is widely used in the literature. We shall point out that the set of cost inputs having the same optimal production plan is a convex cone. In addition, the structure of an optimal solution is analysed to reveal the stability region.

On the risk-based aggregate planning for seasonal products

In this paper a model is developed to analyze the effect of risk incurring at companies producing highly seasonal products. According to observations the closer to the season we are the better our knowledge on demand distribution. This fact is reflected by a learning effect in demand distribution applied in the model where the aim is to minimize the risk-connected costs originating from the unpredictable behavior of demand. The paper confirms that unpredictability is only one of the decisive factors in sequencing products, and other elements play an important role too. The paper presents forward and backward procedures for determining the production quantities and sequencing of the products in an aggregate planning horizon.

Setup cost stability region for the dynamic lot sizing problem with backlogging

Abstract This paper develops a procedure to find the ‘setup cost stability regions’ for the dynamic lot sizing problem with backlogging. The setup cost stability region for a solution is defined as the set of all setup cost values for which the given solution is optimal. Such results can be useful in studying the robustness of a given solution with respect to errors in cost estimates.

Multi-period models for analyzing the dynamics of process improvement activities

Managing knowledge based resource capabilities has become very important in recent years and during a finite horizon it seems to be reasonable to develop the capabilities intensively at the beginning as one can utilize those over a longer period of time. With the help of multi-period models we check the validity of this idea and characterize the dynamics of development activities. The paper identifies the factors that shape these dynamics and from the behavior of these factors we conclude when the dynamics can be increasing or decreasing. We point out that in stable environment there is tendency for decreasing dynamics but future expectations can significantly modify this outcome. Relationships between the successful or less successful implementation of a business strategy and the dynamics of improvement activities are highlighted as well. For specific model structures explicit solutions are derived.

On the relaxation of multi-level dynamic lot-sizing models

Abstract In this paper the multi level dynamic lot sizing problem is analyzed when setup and holding costs do not depend on time. A zero–one integer programming formulation and its linear relaxation are investigated. The paper shows that for certain classes of problems the relaxed models provide integer solution when the number of periods is below a certain threshold. A counter example shows that at least six periods are required to obtain a unique non-integer solution of the relaxed problem.

Setup cost stability region for the multi-level dynamic lot sizing problem

In this paper the multi-level dynamic lot sizing problem is investigated in which setup costs are parameters and the range within which setup costs can vary without changing the optimal solution is determined. The computations are significantly shortened by the fact that the holding cost function is convex in the number of setups. The topic also raises the problem of convexity of a multi-variable integer function and the search for the neighbouring integer points of the minimum.