Determining Optimal Order Amount for End-of-Life Parts Acquisition with Possibility of Contract Extension
Manufacturers often encounter difficulties in supplying an adequate number of spare parts for a product in its postproduction phase. As a result, manufacturers will sometimes make one final order of a model of spare part that is used to satisfy any demand for the spare part going forward. The problem is compounded when a customer may request an extension to the maintenance or supply contract for which the part is supplied. We present two possible approaches for dealing with the problem: one involves the use of a continuous-time dynamic program that allows for the possibility of salvage, and the other makes use of a two-stage stochastic algorithm that does not consider salvage.
Leifker, Nicholas W.; Jones, Philip C.; and Lowe, Timothy J. (2014). "Determining Optimal Order Amount for End-of-Life Parts Acquisition with Possibility of Contract Extension." The Engineering Economist 59.4, 259-281.
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