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Indiana University Bloomington

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1960 Notable

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Journal Articles

Good Buy? Delaying End–of–Life Purchases

2003, European Journal of Operational Research

K. Cattani, G. Souza

Abstract

We study the effects of delaying an end-of-life buy. Manufacturers sometimes are required to place a final, end-of-life buy for a component that the supplier will no longer provide. The manufacturer performs a newsvendor analysis with the possible result of significant expected overage and underage costs. If the decision can be delayed, the expected overage and underage costs can be reduced. We model the effects of a delay of the final purchase under various scenarios of remaining demand. We contrast the manufacturing benefits with the costs incurred by the supplier and show that the supplier, who benefits greatly from the end-of-life buy, likely will require an incentive to enact a delay. Our results provide an insight to the observation of increasing numbers of end-of-life buys and provides a framework for analysis as manufacturers strive to cope with the issue.

Citation

Cattani, K. and G. Souza (2003), "Good Buy? Delaying End–of–Life Purchases", European Journal of Operational Research, Vol. 146, No. 1.