Bayesian analysis of the production smoothing and inventory adjustment behavior: A case study in electronic parts and components industry

We applied the production smoothing models of inventories taking into consideration the flexible accelerator hypothesis to examine the characteristics of production smoothing and inventory adjustment. Bayesian estimation approach was also developed to approximate the structural parameters of production smoothing models for reliable and efficient inference. A case study in the electronic parts and components industry was investigated also. Findings suggest that anticipated sales for integrated circuits and light emitting diodes significantly and positively influence equilibrium levels of inventories. Although the degree of production smoothing is minor for electronic capacitors, it is moderate for integrated circuits, foundry wafers and LED chips. The case study illustrates the applicability of the proposed Bayesian approach.