Integrated workforce capacity and inventory management under temporary labor supply uncertainty

M.F. Pac, O. Alp, T. Tan

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Abstract

In a manufacturing environment with volatile demand, inventory management can be coupled with dynamic capacity adjustments for handling the fluctuations more effectively. In this study, we consider the problem of integrated capacity and inventory management under non-stationary stochastic demand and flexible capacity uncertainty. The capacity planning problem is investigated from the workforce planning perspective where the capacity can be temporarily increased by utilizing contingent workers from an external labor supply agency. The contingent capacity received from the agency is subject to an uncertainty, but the supply of a certain number of workers can be guaranteed through contracts. We formulate a dynamic programming model to make the optimal capacity decisions at a tactical level (permanent workforce size and contracted number of workers) as well as the operational level (number of workers to be requested from the external labor supply agency in each period), integrated with the optimal operational decision of how much to produce in each period. We analyze the characteristics of the optimal policies and we conduct an extensive numerical analysis that helps us provide several managerial insights.
Original languageEnglish
Place of PublicationEindhoven
PublisherTechnische Universiteit Eindhoven
Number of pages29
ISBN (Print)978-90-386-0885-3
Publication statusPublished - 2007

Publication series

NameBETA publicatie : working papers
Volume196
ISSN (Print)1386-9213

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