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Production-Sales Policies for New Product Diffusion under Stochastic Supply

Authors:
Ashkan Negahban
Jeffrey S. Smith

Keywords: Innovation diffusion; Production uncertainty; Production planning; Inventory management; Monte Carlo simulation

Abstract:
In this study, we highlight the importance of production and sales plans for new products and illustrate the need for explicitly modeling supply uncertainties when making such decisions. We consider the case of variability in the production yield and perform extensive simulation experiments to study its impact on the performance of myopic and build-up policies in terms of the expected profit and risk measures. Managerial implications concerning selection of the production and sales plan are also discussed. The results show that ignoring the production yield variation can result in potentially incorrect decisions on the product launch time. The results also show that the policy selected based on the expected profit does not necessarily minimize risk.

Pages: 197 to 202

Copyright: Copyright (c) IARIA, 2014

Publication date: October 12, 2014

Published in: conference

ISSN: 2308-4537

ISBN: 978-1-61208-371-1

Location: Nice, France

Dates: from October 12, 2014 to October 16, 2014