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Decision support for optimal adaptation of product and supply chain systems based on real options theory

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4 Author(s)
Chong Hyun Park ; Industrial and Operations, Engineering Department, USA ; Lalit Patil ; Kazuhiro Saitou ; Edwin Romeijn

In order to remain profitable in the highly competitive global market, a manufacturing enterprise is expected to proactively adapt itself in anticipation of unplanned, but foreseeable high impact events. This paper presents a decision model for optimal adaptation of product and supply chain systems subject to sudden, severe changes in the operating environment. Extending our previous work, decision-tree based framework is developed for optimally choosing design-supplier alternatives in multi-product, multi-echelon product and supply chain systems based on the real options theory. A case study on a two-component, two-echelon supply chain is presented which highlights unique characteristics of product quality as compared to cost and time.

Published in:

2009 IEEE International Conference on Automation Science and Engineering

Date of Conference:

22-25 Aug. 2009