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Abstract: Author's abstract. Motivated by many applications such as typical blockbuster product launches, we address in this paper, an inventory/production rollover process between an old and a new product, with a random availability/admissibility date for the new product. The optimization problem consists in nding the phase-in and phase-out dates which minimize a cost minimization objective function. We capture, via a CVar formulation, the risk phenomenon in the rollover decision making. Then, we provide explicit closed-form expressions for the optimal policies, which can be of three types: Planned Stock-out Rollover, Single Product Rollover, and Dual-Product Rollover. The analysis led to several managerial insights which are provided in the paper.

For instance, we exhibit, first, the impact of risk-aversion on the optimal strategy structure. Then, we show that increasing randomness of the availability date (in the stochastic dominance sense) reinforces the structure of the optimal strategy. We show that the stock-out period is increased in case of optimal Planned Stock-out Rollover and the overlap period is increased for optimal Dual-Product Rollover.

Keywords: product rollover; uncertain approval date; planned stockout rollover (psr); single product rollover (spr); dual product rollover(dpr); risk sensitive optimization criterion; conditional value at risk (cvar); stochastic dominance; stochastic comparisons

70 pages, December 20, 2011

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