Analysis of postponement strategy by EPQ-based models with planned backorders

Jian Li, Shouyang Wang, Edwin Tai Chiu Cheng

Research output: Journal article publicationJournal articleAcademic researchpeer-review

34 Citations (Scopus)

Abstract

This paper develops economic production quantity (EPQ)-based models with planned backorders to evaluate the impact of the postponement strategy on a manufacturer in a supply chain. We derive the optimal total average costs per unit time for producing and keeping n end-products in a postponement system and a non-postponement system, respectively. By comparing the optimal total average costs of the two systems, we evaluate the impact of postponement on the manufacturer under four circumstances. Our results show that postponement strategy can give a lower total average cost under certain circumstances. We also find that the key factors in postponement decisions are the variance of the machine utilization rates and the variance of the backorder costs.
Original languageEnglish
Pages (from-to)777-788
Number of pages12
JournalOmega
Volume36
Issue number5
DOIs
Publication statusPublished - 1 Oct 2008

Keywords

  • Backorder
  • Economic production quantity (EPQ)
  • Postponement
  • Supply chain management (SCM)

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research
  • Information Systems and Management

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