Production Control with Backlog-Dependent Demand
نویسنده
چکیده
We study a manufacturing firm that builds a product to stock to meet a random demand. Production time is deterministic, so that if there is a backlog, customers are quoted a firm lead time that is proportional to the backlog. In order to represent the customers’ response to waiting, we introduce a new defection function — the probability that a customer chooses not to order as a function of the backlog. Unlike models with backorder costs, the defection function is related to customer behavior. Using a continuous flow control model with linear holding cost and Markov modulated demand, we show that the optimal production policy has a hedging point form. The performance of the system under this policy is evaluated, allowing the optimal hedging point to be found.
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