Production and Inventory Management with Substitutions

This book addresses production and inventory management problems where products can be replaced by specified substitutes. Depending on the considered application, substitutions can potentially improve the service level, reduce required safety stocks and t

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Founding Editors: M. Beckmann H.P. Künzi Managing Editors: Prof. Dr. G. Fandel Fachbereich Wirtschaftswissenschaften Fernuniversität Hagen Feithstr. 140/AVZ II, 58084 Hagen, Germany Prof. Dr. W. Trockel Institut für Mathematische Wirtschaftsforschung (IMW) Universität Bielefeld Universitätsstr. 25, 33615 Bielefeld, Germany Editorial Board: H. Dawid, D. Dimitrow, A. Gerber, C-J. Haake, C. Hofmann, T. Pfeiffer, R. Slowinski, H. Zijm

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J. Christian Lang

Production and Inventory Management with Substitutions

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Dr. J. Christian Lang Technische Universität Darmstadt Department of Law, Business and Economics Chair of Operations Research Hochschulstr. 1 64289 Darmstadt Germany [email protected]

ISSN 0075-8442 ISBN 978-3-642-04246-1 e-ISBN 978-3-642-04247-8 DOI 1 0.1007/978-3-642-04247-8 Springer Heidelberg Dordrecht London New York zgl. Dissertation, Technische Universität Darmstadt, 2009, D17, submitted under the title “Production and Inventory Management with Flexible Bills-of-Materials and Substitutions” Library of Congress Control Number: 2009934481 © Springer-Verlag Berlin Heidelberg 2010 This work is subject to copyright. All rights are reserved, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilm or in any other way, and storage in data banks. Duplication of this publication or parts thereof is permitted only under the provisions of the German Copyright Law of September 9, 1965, in its current version, and permissions for use must always be obtained from Springer. Violations are liable for prosecution under the German Copyright Law. The use of general descriptive names, registered names, trademarks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. Cover design: SPi Publisher Services Printed on acid-free paper Springer is part of Springer Science+Business Media (www.springer.com)

Foreword

Quantitative approaches for solving production planning and inventory management problems in industry have gained growing importance in the past years. Due to the increasing use of Advanced Planning Systems, a widespread practical application of the sophisticated optimization models and algorithms developed by the Production Management and Operations Research community now seem within reach. The possibility that products can be replaced by certain substitute products exists in various application areas of production planning and inventory management. Substitutions can be useful for a number of reasons, among others to circumvent production and supply bottlenecks and disruptions, increase the service level, reduce setup costs and times, and lower inventories and thereby decrease capital lockup. Considering the current trend in industry towards shorter product life cycles and greater