The article proposes a new model to provide recommendations on how many extra parts need to be manufactured after production stops to meet service requests over a service period that can last up to 5 years. What makes the problem so difficult is that a final production run must be able to satisfy demand for several years. Sometimes, it can be better to offer customers an alternative system in the long run. The article includes a new, exact methodology for this problem, based on martingale theory, which up to now has rarely been used in Operations Management. Please click here to read the paper.
Rommert Dekker is Professor of Operational Research, Quantitative Logistics and IT at Erasmus School of Economics at the Erasmus University Rotterdam.