A production inventory model for high-tech products involving two production runs and a product variation

Abstract

This paper explores a production inventory model considering two high-tech products of the same kind. One is the primary product and the other is the updated version of that primary product. Due to continuous development in technology, the life-cycle of some high-tech products, like, smartphone, tablet, laptop, etc. have become shorter. We witness the launching of new products more frequently in this field. This prompts the manufacturers to release an updated or pro version of their existing products after a certain time to compete in the market. The reputation of the primary product (in terms of quality and performance) plays an important role in generating the demand for the updated product. Due to the short life-cycle of the products, the proposed model considers only two consecutive production runs. One for the primary product and one for the updated product. Here the demands of both the products depend on the respective selling prices. Moreover, the demand of the updated product is also dependent on the quality of the primary product. Shortages for the primary product are allowed. Those shortages are backlogged partially with the updated product. Also, the possibility of imperfect production during regular production runs is considered. The selling prices, production rates, and the production run times for both the products are considered here as decision variables. Due to the complexity in the resulting optimization problem, the quantum-behaved particle swarm optimization technique is applied to derive the optimal profit. The concavity natures of the profit function are shown graphically. A numerical illustration is presented for the economic validation of the model. Finally, sensitivity analysis of the optimal solutions concerning the key inventory parameters is conducted for identifying several managerial implications.