Letter to the Editor—Production Schedules Involving Cancellation and Obsolescence Risks

Abstract

For some types of items that are to be manufactured, both cancellation of production and obsolescence of the product are important considerations. If a schedule that calls for too rapid a production of the item is used, a large loss (excess tooling costs, etc.) occurs when the manufacturing is cancelled prematurely. Conversely, if too slow a production schedule is used, a large loss in over-all product worth can arise because of the obsolescence, or nearness to obsolescence, of a substantial amount of the product. Thus selection of a suitable production schedule represents a compromise between the risk of cancellation and obsolescence. This note presents a method for deciding which schedule, among a given group of schedules, is preferable for the production of an item of the type considered.