Coordinating batch production and pricing of a make-to-stock product

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

6 Scopus Citations
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Author(s)

  • Liuxin Chen
  • Youyi Feng
  • Jihong Ou

Related Research Unit(s)

Detail(s)

Original languageEnglish
Pages (from-to)1674-1680
Journal / PublicationIEEE Transactions on Automatic Control
Volume54
Issue number7
Publication statusPublished - 2009

Abstract

Consider a make-to-stock product that is produced in batches and sold in individual units. The production process is stochastic with its mean time controllable in a fixed range; and the product is sold at either a high price with a low demand or a low price with a high demand. Coordinating the dynamic adjustment of the production rate and the sale price is crucial for maximizing the total discounted profit. We derive in this note that, the optimal control of the production rate follows a critical stock policy and the optimal pricing follows a price-switch threshold policy, with both associated with the finished goods inventory. © 2009 IEEE.

Research Area(s)

  • Batch production, Critical stock policy, Dynamic pricing, Make-to-stock, Optimal production control, Price-switch threshold policy

Citation Format(s)

Coordinating batch production and pricing of a make-to-stock product. / Chen, Liuxin; Feng, Youyi; Ou, Jihong.

In: IEEE Transactions on Automatic Control, Vol. 54, No. 7, 2009, p. 1674-1680.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review