Browsing by Subject "Substitute products."

Now showing 1 - 2 of 2

Open Access
Product rollover strategy and inventory policy of a monopoly manufacturing substitutable products
(2010) Koca, Esma
In many industries, effective management of product rollovers is extremely important for being able to survive. In management of product rollovers, timing decision; i.e., time to introduce of a secondary product and time to phase out a primal product is critical. Inventory policy is another factor that affects management of rollovers. In this study, we analyze primary rollover strategy of a monopoly manufacturing two substitute products together with its contingency strategies over a two period planning term. Specifically, we consider four different primary rollover strategies, namely Base Strategy, IS Strategy, ISES Strategy and IFES Strategy, derived with existence/non-existence of the products. Base Strategy is associated with the case where we decide to introduce and sell only the primary product. On the other hand, IS Strategy brings introduction of a newer (secondary) product in the second period. If monopoly chooses to make its move with IFES Strategy, it introduces both of the products simultaneously in the first period while phasing out the primary product in the beginning of the next period. Another alternative strategy, ISES Strategy, would be selling products in different periods, primary product first and secondary product next. When a primary strategy is selected, there is a commitment to this strategy. In this study, to reflect market conditions, we consider two alternative demand forms; multiplicative and additive forms and there is an adjustment to market through inventory policy. Firm replenishes its stocks with an order-up-to policy in each period where demands for these substitute products are assumed to be correlated and these products assumed to be substitutable; i.e., there exists stockout-induced substitution between the products.In the analysis, we determine the optimal inventory levels when a specified rollover strategy is executed. Moreover, we explore the conditions, which play important role in making rollover strategies. Furthermore, factors that affect early and late introduction of a new product into the market are investigated. We also discuss the factors that motivate a monopoly to introduce a new product.
Open Access
Timing and ordering decisions under single and dual product rollover strategies
(2011) Aras, Ahmet Korhan
In many industries, firms replace products that have been introduced to the market and that are in advanced stages of their life cycles. The process of introducing a new product and eventually displacing an old one is referred to as product rollover. In planning for new product introduction, it is very important that careful business decisions are made for phasing out the old product, as the related costs may be significant. In this thesis, we study the ordering and timing decisions of a supplier for successive generations of a product under two different strategies: single product rollover and dual product rollover. In both cases, we present models explicitly accounting for inventory holding costs, salvage value, lost sale cost, demand uncertainty of both the products and product cannibalization. We report the results of an extensive numerical study to investigate the structural properties of the expected profit function, and how the optimal timing and ordering decisions change under different settings.