Journal article
Production Planning with Inventory-Based Financing
Foundations and trends in technology, information, and operations management, Vol.14(1-2), pp.121-137
2020
DOI: 10.1561/0200000096-7
Abstract
This paper uses a mixed integer programming model to study a production and inventory planning problem faced by a manufacturer who utilizes Inventory-Based Financing (IBF) to capture additional demands during peak seasons that otherwise will not be met due to a shortage of working capital. By exploiting the problem's inherent structure of three distinct but related manufacturer decisions, i.e., the production, financing and working capital allocation decisions, the paper develops a branch-and-bound procedure to solve the model which is shown to be NP-hard. Through a series of numerical experiments, our study provides a number of interesting managerial insights into how the manufacturer's optimal production and inventory plans could differ with and without IBF. Specifically, we find that (a) the manufacturer would strategically overstock his inventory for the purpose of securing more loans, and this overstocking behavior is more acute in periods immediately prior to the peak demand period; and (b) the manufacturer could take advantage of the difference in peak and non-peak seasons of product demands by partially financing the production of one product through pledging the cycle inventory of another product.
Details
- Title: Subtitle
- Production Planning with Inventory-Based Financing
- Creators
- Renato de Matta - University of IowaVernon Hsu - Chinese University of Hong Kong
- Resource Type
- Journal article
- Publication Details
- Foundations and trends in technology, information, and operations management, Vol.14(1-2), pp.121-137
- Publisher
- Now Publishers
- DOI
- 10.1561/0200000096-7
- ISSN
- 1571-9545
- eISSN
- 1571-9553
- Number of pages
- 17
- Language
- English
- Date published
- 2020
- Academic Unit
- Business Analytics
- Record Identifier
- 9984380497902771
Metrics
11 Record Views