Order quantities for style goods with two order opportunities and Bayesian updating of demand. Part II: capacity constraints

Abstract

This paper is the second of two papers that study the problem of ordering a family of style-goods products where demand is uncertain and there are two order opportunities. The first opportunity has a long lead time and low unit cost. The second opportunity has a short lead time and high unit cost. During the time between the two order opportunities new information on demand becomes available. The information is used in a Bayesian estimation process to revise demand forecasts. There are capacity constraints at both order opportunities. The first paper (Miltenburg, J. and Pong, H.C., Order quantities for style goods with two order opportunities and Bayesian updating of demand. Part I: No capacity constraints. Int. J. Prod. Res., 2007, 7, 1643--1663) studied the problem without capacity constraints. The problem examined in this paper is based on problems at a real company. Several inventory models having different information and computation requirements are developed to determine good order quantities. The models are organized into a framework that real companies can use to select the best problem statement and solution procedure for their particular situation.