The University of Southampton
University of Southampton Institutional Repository

Managing inventory and production capacity in start-up firms

Managing inventory and production capacity in start-up firms
Managing inventory and production capacity in start-up firms
We consider the problem of managing inventory and production capacity in a start-up manufacturing firm with the objective of maximising the probability of the firm surviving as well as the more common objective of maximising profit. Using Markov decision process models, we characterise and compare the form of optimal policies under the two objectives. This analysis shows the importance of coordination in the management of inventory and production capacity. The analysis also reveals that a start-up firm seeking to maximise its chance of survival will often choose to keep production capacity significantly below the profit-maximising level for a considerable time. This insight helps us to explain the seemingly cautious policies adopted by a real start-up manufacturing firm.
start-up firms, inventory, production capacity, stochastic modelling, markov decision processs
0160-5682
1624-1634
Thomas, Lyn C.
a3ce3068-328b-4bce-889f-965b0b9d2362
Possani, E
b7ed7f3e-169c-48df-a326-d4d908b5e5c4
Thomas, Lyn C.
a3ce3068-328b-4bce-889f-965b0b9d2362
Possani, E
b7ed7f3e-169c-48df-a326-d4d908b5e5c4

Thomas, Lyn C. and Possani, E (2017) Managing inventory and production capacity in start-up firms. Journal of the Operational Research Society, 66 (10), 1624-1634. (doi:10.1057/jors.2014.110).

Record type: Article

Abstract

We consider the problem of managing inventory and production capacity in a start-up manufacturing firm with the objective of maximising the probability of the firm surviving as well as the more common objective of maximising profit. Using Markov decision process models, we characterise and compare the form of optimal policies under the two objectives. This analysis shows the importance of coordination in the management of inventory and production capacity. The analysis also reveals that a start-up firm seeking to maximise its chance of survival will often choose to keep production capacity significantly below the profit-maximising level for a considerable time. This insight helps us to explain the seemingly cautious policies adopted by a real start-up manufacturing firm.

Text
090914JORS_SI_DJWhite-Revision (3).pdf - Author's Original
Download (125kB)

More information

Accepted/In Press date: 1 October 2014
Published date: 21 December 2017
Keywords: start-up firms, inventory, production capacity, stochastic modelling, markov decision processs
Organisations: Centre of Excellence in Decision, Analytics & Risk Research

Identifiers

Local EPrints ID: 380297
URI: http://eprints.soton.ac.uk/id/eprint/380297
ISSN: 0160-5682
PURE UUID: 7f857648-3f34-42b6-a8a6-75207c8f22a2

Catalogue record

Date deposited: 08 Sep 2015 13:11
Last modified: 14 Mar 2024 20:57

Export record

Altmetrics

Contributors

Author: Lyn C. Thomas
Author: E Possani

Download statistics

Downloads from ePrints over the past year. Other digital versions may also be available to download e.g. from the publisher's website.

View more statistics

Atom RSS 1.0 RSS 2.0

Contact ePrints Soton: eprints@soton.ac.uk

ePrints Soton supports OAI 2.0 with a base URL of http://eprints.soton.ac.uk/cgi/oai2

This repository has been built using EPrints software, developed at the University of Southampton, but available to everyone to use.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we will assume that you are happy to receive cookies on the University of Southampton website.

×