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Dynamic expediting of an urgent order with uncertain progress

Bertazzi, L.; Mogre, R.

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Authors

L. Bertazzi



Abstract

A supplier manages an urgent order with uncertain progress for which her client has set a deadline for its completion. The supplier observes in real time the order progress and chooses dynamically the effort level, such as manpower level, to expedite the order. Her problem is to identify expediting policies to minimise her expected cost, given by two costs in trade-off with each other: an effort level cost and a one-time penalty cost for late completion of the order. We formulate this problem using a discrete stochastic dynamic programming framework and obtain an optimal expediting policy for it.By conducting a worst-case analysis, we show that decreasing the level of flexibility, interpreted as the supplier’s ability to update effort levels more often, may lead to a large increase in the costs of managing the order. We refine the problem formulation by modelling the case in which the supplier takes into account the negative effects of late order completion on her client using a penalty cost charged every period the order is delayed. We find an optimal policy for this case, by solving two dynamic programming problems sequentially. For both problems, we show that in presence of certain assumptions, there is an optimal expediting policy for which effort levels are non-increasing in the order progress. Finally, using a simulation study based on a car seat assembly case, we compare the performance of the two policies.

Citation

Bertazzi, L., & Mogre, R. (2018). Dynamic expediting of an urgent order with uncertain progress. European Journal of Operational Research, 267(1), 78-85. https://doi.org/10.1016/j.ejor.2017.11.012

Journal Article Type Article
Acceptance Date Nov 8, 2017
Online Publication Date Nov 14, 2017
Publication Date May 1, 2018
Deposit Date Nov 9, 2017
Publicly Available Date Nov 14, 2019
Journal European Journal of Operational Research
Print ISSN 0377-2217
Electronic ISSN 1872-6860
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 267
Issue 1
Pages 78-85
DOI https://doi.org/10.1016/j.ejor.2017.11.012
Public URL https://durham-repository.worktribe.com/output/1340201

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