Two-stage ordering decision for a short-life-cycle product

Abstract

This paper investigates the ordering decision problem for a short-life-cycle product under Bayesian updating. For a product characterized by a single manufacturing cycle and two selling periods, we depict a Two-Stage (TS) ordering strategy with a stochastic dynamic programming model in the view of the whole system, and prove that the expected profit function of the whole system is concave on the first ordering quantity and the remedial ordering quantity, respectively. Then, the optimal ordering decision is developed. Finally, characteristics of the optimal ordering quantities are analyzed with several examples. Our results show that the suggested TS decision model is better than a Quick Response (QR) decision model.

Keywords

Short-life-cycle product / Bayesian updating / ordering quantity / stochastic dynamic programming

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