Coordinating Inventory Control and Pricing Strategies with Random Demand and Fixed Ordering Cost: The Finite Horizon Case

We analyze a finite horizon, single product, periodic review model in which pricing and production/inventory decisions are made simultaneously. Demands in different periods are random variables that are independent of each other and their distributions depend on the product price. Pricing and ordering decisions are made at the beginning of each period and all shortages are backlogged. Ordering cost includes both a fixed cost and a variable cost proportional to the amount ordered. The objective is to find an inventory policy and a pricing strategy maximizing expected profit over the finite horizon. We show that when the demand model is additive, the profit-to-go functions are k-concave and hence an (s,S,p) policy is optimal. In such a policy, the period inventory is managed based on the classical (s,S) policy and price is determined based on the inventory position at the beginning of each period. For more general demand functions, i.e., multiplicative plus additive functions, we demonstrate that the profit-to-go function is not necessarily k-concave and an (s,S,p) policy is not necessarily optimal. We introduce a new concept, the symmetric k-concave functions and apply it to provide a characterization of the optimal policy.

Coordinating Inventory Control and Pricing Strategies with Random Demand and Fixed Ordering Cost: the Infinite Horizon Case

We analyze an infinite horizon, single product, periodic review model in which pricing and production/inventory decisions are made simultaneously. Demands in different periods are identically distributed random variables that are independent of each other and their distributions depend on the product price. Pricing and ordering decisions are made at the beginning of each period and all shortages are backlogged. Ordering cost includes both a fixed cost and a variable cost proportional to the amount ordered. The objective is to maximize expected discounted, or expected average profit over the infinite planning horizon. We show that a stationary (s,S,p) policy is optimal for both the discounted and average profit models with general demand functions. In such a policy, the period inventory is managed based on the classical (s,S) policy and price is determined based on the inventory position at the beginning of each period.

Measuring Value in Product Development

“What is value in product development?” is the key question of this paper. The answer is critical to the creation of lean in product development. By knowing how much value is added by product development (PD) activities, decisions can be more rationally made about how to allocate resources, such as time and money. In order to apply the principles of Lean Thinking and remove waste from the product development system, value must be precisely defined. Unfortunately, value is a complex entity that is composed of many dimensions and has thus far eluded definition on a local level. For this reason, research has been initiated on “Measuring Value in Product Development.” This paper serves as an introduction to this research. It presents the current understanding of value in PD, the critical questions involved, and a specific research design to guide the development of a methodology for measuring value. Work in PD value currently focuses on either high-level perspectives on value, or detailed looks at the attributes that value might have locally in the PD process. Models that attempt to capture value in PD are reviewed. These methods, however, do not capture the depth necessary to allow for application. A methodology is needed to evaluate activities on a local level to determine the amount of value they add and their sensitivity with respect to performance, cost, time, and risk. Two conceptual tools are proposed. The first is a conceptual framework for value creation in PD, referred to here as the Value Creation Model. The second tool is the Value-Activity Map, which shows the relationships between specific activities and value attributes. These maps will allow a better understanding of the development of value in PD, will facilitate comparison of value development between separate projects, and will provide the information necessary to adapt process analysis tools (such as DSM) to consider value. The key questions that this research entails are: · What are the primary attributes of lifecycle value within PD? · How can one model the creation of value in a specific PD process? · Can a useful methodology be developed to quantify value in PD processes? · What are the tools necessary for application? · What PD metrics will be integrated with the necessary tools? The research milestones are: · Collection of value attributes and activities (September, 200) · Development of methodology of value-activity association (October, 2000) · Testing and refinement of the methodology (January, 2001) · Tool Development (March, 2001) · Present findings at July INCOSE conference (April, 2001) · Deliver thesis that captures a formalized methodology for defining value in PD (including LEM data sheets) (June, 2001) The research design aims for the development of two primary deliverables: a methodology to guide the incorporation of value, and a product development tool that will allow direct application.

Pi: A Parallel Architecture Interface for Multi-Model Execution

This thesis defines Pi, a parallel architecture interface that separates model and machine issues, allowing them to be addressed independently. This provides greater flexibility for both the model and machine builder. Pi addresses a set of common parallel model requirements including low latency communication, fast task switching, low cost synchronization, efficient storage management, the ability to exploit locality, and efficient support for sequential code. Since Pi provides generic parallel operations, it can efficiently support many parallel programming models including hybrids of existing models. Pi also forms a basis of comparison for architectural components.

A FRAMEWORK FOR ACHIEVING LIFECYCLE VALUE IN AEROSPACE PRODUCT DEVELOPMENT

Creation of lifecycle value - a balance of performance with cost and other attributes - represents a challenge for the development of aerospace products in the twenty-first century. This paper examines the concept of lifecycle value that stems from existing approaches of value management and analysis, lifecycle costing, and systems engineering. To ascertain common characteristics of lifecycle value creation, case studies were done for four aircraft programs: F/A- 18E/F, JAS 39 Gripen, F-16C/D, and B-777. A lifecycle value creation framework is introduced, comprised of three phases: value identification, value proposition, value delivery. Based upon observed practices in the four case studies, six value creation attributes were identified. Capability maturity models for the six attributes and three value creation phases are presented. The resulting framework represents a starting point for programs seeking to create lifecycle value for aerospace products.

Lifecycle Value Framework for Tactical Aircraft Product Development

Due to a dramatic reduction in defense procurement, the benchmark for developing new defense systems today is performance at an affordable cost. In an attempt to encircle a more holistic perspective of value, lifecycle value has evolved as a concept within the Lean Aerospace Initiative, LAI. The implication of this is development of products incorporating lifecycle and long-term focus instead of a shortsighted cost cutting focus. The interest to reduce total cost of ownership while still improving performance, availability, and sustainability, other dimensions taken into account within the lifecycle value approach, falls well within this context. Several factors prevent enterprises from having a holistic perspective during product development. Some important aspects are increased complexity of the products and significant technological uncertainty. The combination of complexity in system design and the limits of individual human comprehension typically prevent a best value solution to be envisioned. The purpose of this research was to examine relative contributions in product development and determine factors that significantly promote abilities to consider and achieve lifecycle value. This paper contributes a maturity matrix based on important practices and lessons learned through extensive interview based case studies of three tactical aircraft programs, including experiences from more than 100 interviews.

Output from the 1998 Product Development Value Stream Workshop: A Framework for Understanding Information Flow in the Product Development Process

The descriptions below and the attached diagrams are outputs of the 1998 LAI Product Development Focus Team workshop on the Value Chain in Product Development. A working group at that workshop was asked to model the product development process: in terms of the phases of product development and their interfaces, boundaries and outputs. Their work has proven to be generally useful to LAI researchers and industry members, and so is formalized here.

Strategies for Lean Product Development

The essence of lean is very simple, but from a research and implementation point of view overwhelming. Lean is the search for perfection through the elimination of waste and the insertion of practices that contribute to reduction in cost and schedule while improving performance of products. This concept of lean has wide applicability to a large range of processes, people and organizations, from concept design to the factory floor, from the laborer to the upper management, from the customer to the developer. Progress has been made in implementing and raising the awareness of lean practices at the factory floor. However, the level of implementation and education in other areas, like product development, is very low.