Mitigating Hi-tech products risks due to rapid technological innovation

• Published in: Omega (Oxford) Vol. 39; no. 4; pp. 456 - 463
• Main Authors: Yang, P.C., Wee, H.M., Liu, B.S., Fong, O.K.
• Format: Journal Article
• Language: English
• Published: Kidlington Elsevier Ltd 01.08.2011; Elsevier; Pergamon Press Inc
• Series: Omega
• Subjects: Applied sciences; Economic models; Exact sciences and technology; Hi-tech products; Hi-tech products Innovation Replenishment policy Risks; High technology; Innovation; Innovations; International trade; Inventory control, production control. Distribution; Numerical analysis; Operational research and scientific management; Operational research. Management science; Order quantity; Replenishment policy; Risks; Sensitivity analysis; Studies; Technological change; Risks; Innovation; Replenishment policy; Hi-tech products; Sensitivity analysis; New product; Refeeding; Consumer products; Modeling; Optimization; Selling price; Cost price; International trade; Finite horizon; Replenishment; Economic order quantity; Planning; Advanced technology
• ISSN: 0305-0483; 1873-5274
• DOI: 10.1016/j.omega.2010.09.007

The risks on international trade have increased continuously in recent years. One such risk for Hi-tech products is the result of rapid technological innovation, which results in a significant decline in the component cost, the selling price and the demand (due to newer products introduction). The Hi-tech products include computers and communication consumer products. From a practical viewpoint, there is a need to develop an innovative replenishing policy to consider the impact of the risk. In this paper, an economic order quantity model with finite planning horizon is developed for a buyer, when the component cost, the selling price and the demand rate of the end-consumer decline at a continuous rate. A numerical example and sensitivity analysis for two case studies are carried out to illustrate this model.