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Production and service systems with demand affected by customer satisfaction

Konstantas Dimitrios

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Summary

In this dissertation, mathematical models are presented that were developed to understand how product quality can affect the profitability of production systems when consumers base their future demand patterns on the quality of the product they have recently purchased. We examine production systems that receive orders from regular and occasional customers, with the former having a higher average demand rate. Each outgoing product undergoes quality control to decide whether it will be rejected as non-conforming or sent to a customer. In the latter case, the customer who purchases the final product will subsequently become either a regular or occasional customer with complementary probabilities depending on the quality level of the specific product. We studied make-to-order production networks, single-stage systems where customer satisfaction is determined by the previous state of customers, and single-stage make-to-stock production systems. The results of numerical experiments conducted using dynamic programming show that the optimal policy depends on the state of the system, is complex, and has increased computational requirements. In the case of make-to-order production networks without memory of the previous state of customers, a simple threshold heuristic policy is proposed. Closed queuing network models with minimal computational requirements are used for the analysis and optimization of the proposed heuristic policy. Numerical results indicate that the proposed heuristic policy performs almost as well as the optimal policy.

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