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Decision Support for Optimal Adaptation of Product and Supply Chain Systems based on Real Options Theory

By Chong Hyun Park, Lalit Patil, Kazuhiro Saitou and H. 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

Publisher: IEEE
Year: 2009
DOI identifier: 10.1109/COASE.2009.5234119
OAI identifier: oai:deepblue.lib.umich.edu:2027.42/87256
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