the allocation of inventory risk in a supply chain push pull and advance purchase discount contracts while every firm in a supply chain bears supply risk the cost of insufficient supply some firms may even with wholesale price contracts completely avoid inventory risk the cost of unsold inventory with a push contract there is a single wholesale price and the retailer by ordering his entire supply before the selling season bears all of the supply chain s inventory risk a pull contract also has a single wholesale price but the supplier bears the supply chain s inventory risk because only the supplier holds inventory while the retailer replenishes as needed during the season examples include vendor managed inventory with consignment and drop shipping an advance purchase discount has two wholesale prices a discounted price for inventory purchased before the season and a regular price for replenishments during the selling season advance purchase discounts allow for intermediate allocations of inventory risk the retailer bears the risk on inventory ordered before the season while the supplier bears the risk on any production in excess of that amount this research studies how the allocation of inventory risk via these three types of wholesale price contracts impacts supply chain efficiency the ratio of the supply chain s profit to its maximum profit it is found that the efficiency of a single wholesale price contract is considerably higher than previously thought as long as firms consider both push and pull contracts in other words the literature has exaggerated the value of implementing coordinating contracts i e contracts that achieve 100 efficiency such as buy backs or revenue sharing because coordinating contracts are compared against an inappropriate benchmark often just a push contract furthermore if firms also consider advance purchase discounts which are also simple to administer then the coordination of the supply chain and the arbitrary allocation of its profit is possible several limitations of advance purchase discounts are discussed

optimal pricing and return policies for perishable commodities this paper considers the pricing decision faced by a producer of a commodity with a short shelf or demand life a hierarchical model is developed and the results of the single period inventory model are used to examine possible pricing and return policies the paper shows that several such policies currently in effect are suboptimal these include those where the manufacturer offers retailers full credit for all unsold goods or where no returns of unsold goods are permitted the paper also demonstrates that a policy whereby a manufacturer offers retailers full credit for a partial return of goods may achieve channel coordination but that the optimal return allowance will be a function of retailer demand therefore such a policy cannot be optimal in a multi retailer environment it is proven however that a pricing and return policy in which a manufacturer offers retailers a partial credit for all unsold goods can achieve channel coordination in a multi retailer environment this article was originally published in marketing science volume 4 issue 2 pages 166 176 in 1985

reverse channel design the case of competing retailers the economical and environmental benefits of product remanufacturing have been widely recognized in the literature and in practice in this paper we focus on the interaction between a manufacturers reverse channel choice to collect postconsumer goods and the strategic product pricing decisions in the forward channel when retailing is competitive to this end we model a direct product collection system in which the manufacturer collects used products directly from the consumers e g print and copy cartridges and an indirect product collection system in which the retailers act as product return points e g single use cameras cellular phones we first examine how the allocation of product collection to retailers impacts their strategic behavior in the product market and we discuss the economic trade offs the manufacturer faces while choosing an optimal reverse channel structure when a direct collection system is used channel profits are driven by the impact of scale of returns on collection effort whereas in the indirect reverse channel supply chain profits are driven by the competitive interaction between the retailers subsequently we show that the buy back payments transfered to the retailers for postconsumer goods provide a wholesale pricing flexibility that can be used to price discriminate between retailers of different profitability

measuring risk reduction benefits with discounted longevity there are many ways to assess the benefits and costs of risk reduction policies this paper shows that discounted longevity as a measure of benefits and the negative of net output as a measure of costs can be deduced from the shepard and zeckhauser utility maximization model

explaining fashion cycles imitators chasing innovators in product space abstract this paper considers the problem of a fashion trend setter confronting an imitator who can produce the same product at lower cost a one dimensional product space is considered which is an abstraction of the key attribute of some consumer good three broad strategies can be optimal for the fashion leader 1 never innovate which milk profits from the initially advantageous position but ultimately concede the market without a fight 2 innovate once but only once which just temporarily defers conceding the market 3 cycle infinitely around product space never letting the imitator catch up and capture the market sometimes the cycles start immediately sometimes the innovator should wait for a time before beginning the cycles the optimal solution exhibits strong state dependency with so called skiba curves separating regions in state space where various of these strategies are optimal there are even instances of intersecting skiba curves in most cases analytical expressions can be stated that characterize these skiba curves

designing a firm s coordinated manufacturing and supply decisions with short product life cycles in this paper we consider a problem of joint coordination between a firm s manufacturing and supply departments the manufacturing department is responsible for meeting random demand of a product with a short life cycle the supply department s responsibility is to provide the sufficient amount of raw materials so that the required production level can be achieved when coordination prevails both departments decisions are jointly made otherwise decisions are made independently without an exchange of information if the random demand exceeds the amount produced a second production run can be expedited at a substantially higher cost our analysis yields insightful results to such a coordination problem between the two departments we provide conditions under which it is desirable to coordinate resulting in a significant increase in expected profit if coordination is optimal then the supply department would purchase additional reserved material for the second run under this scenario we analyze the effects of joint coordination on the expected profit we also find explicit conditions for which joint coordination is not beneficial i e the supply department should only order sufficient material to meet the first production run requirements we provide a detailed set of numerical examples and generate response surfaces indicating the desirability of coordination for different pairs of parameter combinations

managing a noncooperative supply chain with limited capacity we consider a two stage serial supply chain with capacity limits where each installation is operated by managers attempting to minimize their own costs a multiple period model is necessitated by the multiple stages capacity limits stochastic demand and the explicit consideration of inventories with appropriate salvage value functions a markov equilibrium policy is found intuitive profit dominance allows for existence of a unique equilibrium solution which is shown to be a modified echelon base stock policy this equilibrium policy structure is sustained in the infinite horizon a numerical study compares the behavior of the decentralized system with the first best integrated capacitated system the performance of this decentralized system relative to the integrated system across other parameters can be very good over a broad range of values this implies that an acceptable system performance may be attained without the imposition of a contract or other coordinating mechanism which themselves may encounter difficulties in implementation in the form of negotiation execution or enforcement of these agreements we find instances where tighter capacities may actually enhance channel efficiency we also examine the effect of capacity utilization on the system suboptimality

channel coordination under price protection midlife returns and end of life returns in dynamic markets this paper examines three channel policies that are used in declining price environments price protection p is a mechanism under which the manufacturer pays the retailer a credit applying to the retailer s unsold inventory when thewholesale price drops during the life cycle midlife returns m allow the retailer to return units partway through the life cycle at some rebate and end of life returns e allow the retailer to return unsold units at the end of the life cycle under decliningretail prices if the wholesale prices and the return rebates are set properly then em i e midlife and end of life returns achieves channel coordination however such a policy may not be implementable because it may require the manufacturer to be worse off as a result of coordination if p is used in addition to em and the terms are set properly then pem guarantees both coordination and a win win outcome if theretail price is constant over time then em is sufficient to guarantee both coordination and a win win outcome

two period production planning and inventory control we study a single product two period production inventory model in which the demands at each period are independent random variables to optimally satisfy these random demands quantities can be produced at the beginning of each period using slow or fast production mode under capacity constraints in addition to the usual decision variables for such models we consider that a certain quantity can be salvaged at the beginning of each period such salvage processes are useful if the initial inventory of a period is considered to be too high the unsatisfied demands for each period are backlogged to be satisfied during the next periods after the end of the second period a last quantity is produced in order to satisfy remaining orders and to avoid lost sales the remaining inventory if any is salvaged we formulate this model using a dynamic programming approach we prove the concavity of the global objective function and we establish the closed form expression of the second period optimal policy then via a numerical solution approach we solve the first period problem and exhibit the structure of the corresponding optimal policy we provide insights via numerical examples that characterize the basic properties of our model and the effect of some significant parameters such as costs demand variabilities or capacity constraints

optimal procurement contracts with pre project planning the paper studies procurement contracts with pre project investigations in the presence of adverse selection and moral hazard to model the procurer s problem we extend a standard sequential screening model to endogenous information acquisition with moral hazard the optimal contract displays system atic distortions in information acquisition due to a rent effect adverse selection induces too much infor mation acquisition to prevent cost overruns and too little information acquisition to prevent false project cancellations moral hazard mitigates the distortions related to cost overruns yet exacerbates those related to false negatives the optimal mechanism is a menu of option contracts that achieves the dual goal of providing incentives for information acquisition and truthful information revelation

managing channel profits a channel of distribution consists of different channel members each having his own decision variables however each channel member s decisions do affect the other channel members profits and as a consequence actions a lack of coordination of these decisions can lead to undesirable consequences for example in the simple manufacturer retailer consumer channel uncoordinated and independent channel members decisions over margins result in a higher price paid by the consumer than if those decisions were coordinated in addition the ensuing suboptimal volume leads to lower profits for both the manufacturer and the retailer this paper explores the problems inherent in channel coordination we address the following questions what is the effect of channel coordination what causes a lack of coordination in the channel how difficult is it to achieve channel coordination what mechanisms exist which can achieve channel coordination what are the strengths and weaknesses of these mechanism what is the role of nonprice variables e g manufacturer advertising retailer shelf space in coordination does the lack of coordination affect normative implications from in store experimentation can quantity discounts be a coordination mechanism are some marketing practices actually disguised quantity discounts we review the literature and present a simple formulation illustrating the roots of the coordination problem we then derive the form of the quantity discount schedule that results in optimum channel profits this article was originally published in marketing science volume 2 issue 3 pages 239 272 in 1983

reducing the cost of demand uncertainty through accurate response to early sales traditionally fashion products have incurred high losses due to stockouts and inventory obsolence because long lead times coupled with a concentrated selling season force all or at least most production to be committed before demand information is available under a quick response system lead times are shortened sufficiently to allow a greater portion of production to be scheduled in response to initial demand we model and analyze the decisions required under quick response and give a method for estimating the demand probability distributions needed in our model we applied these procedures with a major fashion skiwear firm and found that cost relative to the current informal response system was reduced by enough to increase profits by 60 relative to the cost that would have been incurred if no response were used optimized response reduces cost by enough to roughly quadruple profits

well adjusted using expediting and cancelation to manage store replenishment inventory for a seasonal good abstract we consider an inventory problem that can be translated into a two period newsvendor setting where the day prior to sales the newsvendor places an initial preliminary order a semi binding forecast with the publisher at the beginning of the actual day of sales the newsvendor has a better forecast for the day s demand based on knowing the actual content of the paper he knows whether it will be a high demand day due to breaking news or a low demand day due to slow news he then can revise the preliminary order quantity by expediting additional papers or canceling all or part of the order but each of these activities has an associated cost we find closed form solutions for the optimal preliminary and revised orders in this two period newsvendor problem where demand is characterized as a binary random variable in the first period and one of two general distributions in the second at the beginning of the second period the binary random variable has been realized and the general distribution is known at this point the preliminary order may be adjusted upward or downward with these changes incurring expediting or cancelation costs respectively

ordering policy and coordination of a supply chain with two period demand uncertainty abstract we develop a two period game model of a one manufacturer and one retailer supply chain to investigate the optimal decisions of the players where stock out and holding costs are incorporated into the model the demand at each period is stochastic and price sharply drops in mid life we assume the retailer has a single order opportunity and decides how much inventory to keep in the middle of selling season we show that both the price protection mid life and end of life returns pme scheme and the only mid life and end of life returns me scheme may achieve channel coordination and access a win win situation under some conditions the larger the lowest expected profit of the retailer the lower the possibility of win win situation will be combined with the analysis of feasible regions for coordination policies we find that pme scheme is not always better than me scheme from the perspective of implementable mechanism finally we find that adopting the dispose down to ddt policy can bring a larger improvement of the expected channel profit in the centralized setting and it is interesting that by using ddt policy double marginalization occurs only at period 1 and however does not plague the retailer in period 2

supply chain coordination with multiple shipments the optimal inventory subsidizing contracts we study a supply chain involving a supplier retailer relationship when production lead time is long and the selling season is short the retailer has to place an order ahead of the season which resembles the classical newsvendor model however we consider the situation when the supplier agrees to deliver the order in multiple shipments in the season and then the retailer needs to determine the quantity and or timing of each shipment under a centralized setting we derive the optimal quantity and or timing decisions of the retailer under a decentralized setting incentive misalignment arises from ineffective allocation of inventory costs between the parties in addition to the well known double marginalization effect hence we devise an incentive contract which involves a risk sharing mechanism at the end of the season and an inventory subsidizing scheme for the entire season in practice the inventory subsidizing scheme can be implemented in different ways such as a direct subsidizing scheme o

efficient supply contracts for fashion goods with forecast updating and two production modes we examine the problem of developing supply contracts that encourage proper coordination of forecast information and production decisions between a manufacturer and distributor of high fashion seasonal products operating in a two mode production environment the first production mode is relatively cheap but requires a long lead time while the second is expensive but offers quick turnaround we focus on contracts of the form w1 w2 b wherewi is the wholesale price offered for production modei andb is a return price offered for items left over at the end of the season we find that such a contract can coordinate the manufacturer and distributor to act in the best interest of the channel the pricing conditions needed to ensure an efficient solution vary depending on the degree of demand forecast improvement between periods and the manufacturer s access to forecast information we also examine whether these conditions ensure a pareto optimal solution with respect to two traditional production settings

pre season stocking and pricing decisions for fashion retailers with multiple information updating abstract motivated by the industrial practice we investigate in this paper the pre season inventory and pricing decisions for fashion retailers before the selling season a retailer can place orders for a seasonal fashion product from her supplier at two distinct stages via two different delivery modes market information from the sales of a pre seasonal product is collected and used to update the demand forecast of the seasonal product at the succeeding stages by using bayesian approach we formulate a dynamic optimization problem and obtain the optimal stocking policy after the ordered seasonal product has arrived and just before the start of the selling season the retailer can determine the optimal selling price of the product with respect to the latest demand information and the amount of product on hand we study the pricing policy under different objectives sensitivity analysis is carried out and the features of the policies are revealed managerial insights are generated

the right to return this article studies the allocation of responsibility for unsold inventory provision for which is made in practically every distribution contract the two extreme cases are the consignment contract which allocates all the burden to the manufacturer and the no return contract in which retailers purchase the merchandise outright and assume responsibility for unsold inventory contract choices are shown to vary across countries industries products and types of transactions the article identifies six main factors affecting this choice optimal inventory policy in a stochastic retail demand environment relative advantage in disposing of the unsold inventory optimal risk allocation incentives to invest in promotions and provide services to increase consumer demand information asymmetry and costs associated with the consignment contract per se several testable implications are presented and the choice of contracts in the publishing industry is shown to be consistent with the predictions of the model

supply contract with bidirectional options the buyer s perspective abstract this paper develops a single period two stage supply contract with bidirectional options by which the buyer can adjust the initial order both upward and downward at the beginning of the planning horizon the buyer places an initial order and purchases options after updating the demand forecast the buyer exercises options to adjust the initial order we analyze the contract from the buyer s perspective and formulate the buyer s optimal policies in particular we obtain closed form formulae to describe the buyer s optimal behavior when the demand is uniformly distributed we also analyze how the parameters affect the buyer s behavior and prove numerically that using bidirectional options can improve the buyer s profit

optimal returns policy for supply chain with e marketplace abstract we study in this paper a supply chain which is integrated by a returns policy in the past owing to a lack of sales channels the returned products would worth very little now with the advance of the e commerce the returned products can be sold with a higher price on the e marketplace in light of this we first investigate the optimal returns policy under the existence of the e marketplace through a mean variance analysis we further study the risk issue associated with the optimal policy extensive simulations are then carried out and the managerial insights are discussed

optimizing the use of contingent labor when demand is uncertain abstract we develop a new model for flexible workforce management in environments with uncertainty in the demand for labor in particular we model a workforce comprised of regular workers who have fixed schedules and may work overtime and contingent workers whose working hours are flexible as specified by a contract over a finite planning horizon our model can represent a variety of contracts including temporary workers on call workers with guaranteed minimum pay and comp time arrangements we formulate the model as an optimization problem that determines the regular and contingent worker pool sizes that minimize expected labor and backlog costs embedded within this problem is a dynamic programming problem of making optimal operational staffing decisions with respect to the utilization of contingent and overtime resources numerical examples demonstrate the effect that the timing of information has on the benefits of flexibility we also derive structural results that may be exploited to reduce the computational effort required to use the model

doing the right thing or doing the thing right allocating resources between marketing research and manufacturing matching production with sales potential is essential for survival in volatile markets manufacturing and marketing managers compete for staff space cash and other assets as they struggle both to determine what and how many products ought to be produced and to actually produce them we develop an analytical framework to answer one simple question how much marketing research should a firm do when it takes resources away from manufacturing the goods that generate revenue to understand the costs and benefits of marketing research we account for the lost opportunities to produce these goods some analytical findings are striking firms without initial knowledge of their potential customers should allocate one third of the firm s resources to marketing research the model suggests a host of issues to be more deeply studied by management scientists

selling to the newsvendor with a forecast update analysis of a dual purchase contract we consider a supply chain in which a manufacturer sells to a procure to stock retailer facing a newsvendor problem with a forecast update under a wholesale price contract the retailer waits as long as she can and optimally places her order after observing the forecast update we show that the retailer s wait and decide strategy induced by the wholesale price contract hinders the manufacturer s ability to 1 set the wholesale price and maximize his profit 2 hedge against excess inventory risk and 3 reduce his profit uncertainty to mitigate the adverse effect of wholesale price contract we propose the dual purchase contract through which the manufacturer provides a discount for orders placed before the forecast update we characterize how and when a dual purchase contract creates strict pareto improvement over a wholesale price contract to do so we establish the retailer s optimal ordering policy and the manufacturer s optimal pricing and production policies we show how the dual purchase contract reduces profit variability and how it can be used as a risk hedging tool for a risk averse manufacturer through a numerical study we provide additional managerial insights and show for example that market uncertainty is a key factor that defines when the dual purchase contract provides strict pareto improvement over the wholesale price contract

capacity reservation contracts for high tech industry abstract capacity reservation provides a risk sharing mechanism that encourages a manufacturer to expand its capacity more we propose a deductible reservation dr contract where customers reserve future capacity with a fee that is deductible from the purchasing price the manufacturer s ex ante announcement of the excess capacity that she will have in addition to the reservation amount is a unique feature of the dr contract an individually rational dr contract that provides channel coordination always exists since there is a unique nash equilibrium for the reservation game among multiple customers the main results of the one customer case can be extended to the n customer case the dr contract is compared with another capacity reservation contract called take or pay while the manufacturer may gain more profit under a take or pay contract there may not be a channel coordinated contract that is also individually rational for the customer finally the similarities and differences between the capacity reservation contracts and other well known supply contracts are discussed

an assessment of the optimal timing and size of investments in concentrated solar power we extend the witch model to consider the possibility to produce and trade electricity generated by large scale concentrated solar power plants csp in highly productive areas that are connected to demand centers through high voltage direct current cables we test the attractiveness of the csp option by imposing a global cap on greenhouse gases concentration equal to 535 ppm co2 eq in 2100 with and without constraints to the expansion of nuclear power and igcc coal with carbon capture and storage ccs we find that it becomes optimal to produce with csp from 2040 and to trade csp electricity across the mediterranean from 2050 therefore projects like desertec seem to be premature after 2050 csp electricity shares become significant csp has a high stabilization cost option value depending on the constraints it ranges between 2 1 and 4 1 of discounted gdp in the middle east and north africa mena between 1 1 and 3 4 in china between 0 2 and 1 2 in the usa between 0 1 and 1 3 in eastern europe and between 0 1 and 0 4 in western europe a moderate level of subsidy to invest more and earlier in csp might increase welfare however large scale deployment should occur after 2040 we also show that mena countries have the incentive to form a cartel to sell electricity to europe at a price higher than the marginal cost this suggests that a hypothetical mediterranean market for electricity should be carefully regulated

managing product variety with advance selling and capacity restrictions abstract in this research we analyze the impact of advance selling with price discount on a firms ability to maximize the expected profit the production environment of the firm is characterized by short selling cycle multiple products demand variability and capacity restrictions the advance orders are randomly distributed with the parameters dependent on the discount levels under advance selling the advance orders are used to update the demand forecast of selling season and are delivered at the start of the selling season the problem is modeled as a three stage stochastic non linear programming problem we derive the concavity of the problem under customers willingness to buy in advance our solution methodology comprises the variance reduction technique of antithetic variates that gives credible value of price discount levels for different sets of demand values we also provide sensitivity analysis of the problem parameters to derive insights into the behavior of the expected profit and the benefits due to advance selling under capacity restrictions

supplier manufacturer coordination in capacitated two stage supply chains abstract manufacture to order is an increasingly popular strategy in commodity electronics and other similar markets where many different product configurations can be produced from common components to succeed in this environment manufacturers need to keep both cost and order fulfillment time low in this article we compare three different mechanisms that a manufacturer whose revenues depend on order delays may use to affect its component supplier s inventory decisions these mechanisms are specifying components inventory level offering a share of the earned revenues to the supplier called simple revenue sharing and offering a two part revenue sharing scheme we show that whereas the first two approaches do not lead to supply chain coordination the two part scheme does we demonstrate with numerical experiments that up to a point the component supplier benefits from having a high utilization of its production facility whereas the manufacturer benefits from having excess production capacity

side payment contracts in two person nonzero sum supply chain games review discussion and applications this paper investigates supply chain coordination with side payment contracts we first summarize specific side payment contracts and present our review on the literature that developed general side payment schemes to coordinate supply chains following our review we discuss two criteria that a proper side payment contract must satisfy and accordingly introduce a decision dependent transfer payment function and a constant transfer term we present the condition that the transfer function must satisfy and use nash arbitration scheme and shapley value to compute the constant transfer term and derive its closed form solution next we provide a five step procedure for the development of side payment contract and apply it to four supply chain games cournot and bertrand games a two retailer supply chain game with substitutable products and a one supplier one retailer supply chain more specifically for the cournot game we construct a linear transfer function and a constant side payment to coordinate two producers for the bertrand game we build a nonlinear transfer function which is equivalent to a revenue sharing contract and show that the constant term is zero and two firms in the game equally share the system wide profit for a supply chain with substitutable products we present a side payment contract to coordinate two retailers for a two echelon supply chain we develop a proper side payment scheme that can coordinate the supply chain and also help reduce the impact of forward buying on supply chain performance

an economic theory of vertical restraints vertical restraints imposed by manufacturers on the prices locations and sales of retail firms represent a puzzling departure from the simple price mediated exchange of conventional markets in this article we analyze the theoretical basis for these restraints in a setting where retailers inform consumers and are imperfectly competitive and where a manufacturer has some monopoly power we identify three potential externalities affecting retailers decisions these externalities lead to the failure of simple uniform price contracts to coordinate the incentives of retailers with the objective of maximizing combined manufacturer and retailer profits we identify the packages of vertical restraints that are minimally sufficient under various conditions to neutralize the externalities and to achieve the joint profit maximum

manufacturer buyer coordination for newsvendor type products with two ordering opportunities and partial backorders abstract in a recent paper weng z k 2004 coordinating order quantities between the manufacturer and the buyer a generalized newsvendor model european journal of operational research 156 148 161 a newsvendor type coordination model was developed for a single manufacturer single buyer channel with two ordering opportunities this paper further extends the model to the case where the excess demand after the first order is partially backlogged and both parties share the manufacturing setup cost of the second order if happened we show that the decentralized system would perform best if the manufacturer covers utterly the second production setup cost which is opposite to that obtained in weng 2004 another extension in the present paper is that in the centralized system the second order decision is made by the buyer based on the channel s benefit rather than based on the buyer s benefit as in weng 2004 it is proved that the expected profit of the system in our paper is always larger than that in weng 2004 in order to maximize the expected profit of the channel two coordinated policies are proposed to achieve perfect coordination a two part tariff policy for the special case that the buyer pays all the manufacturing setup cost and a revised revenue sharing contract for the case that two parties share the manufacturing setup cost

production planning of style goods with high setup costs and forecast revisions in this paper we study a problem common to a wide variety of manufacturing companies of determining the production schedule of style goods such as clothing and consumer durables under capacity constraints demand for items is stochastic and occurs in the last season of the planning horizon demand estimates are revised in each period we exploit the problem s two level hierarchical structure which is characterized by families and items production changeover costs from one family to another are high compared to other costs however changeover costs between items in the same family are negligible we first formulate this problem as a difficult to solve stochastic mixed integer programming problem then exploiting the problem s hierarchical structure we formulate a deterministic mixed integer programming problem and solve it by means of an algorithm that provides an approximate solution a lower bound is obtained by applying generalized linear programming to the approximate problem we illustrate the procedure using the disguised data of a consumer electronics company the computational results demonstrate the effectiveness of the proposed approach in a practical setting

a continuous review model for an inventory system with two supply modes in this paper we develop an approximate model of an inventory control system in which there exist two options for resupply with one having a shorter lead time because the optimal policy appears to be extremely complex we consider a reasonable extension of the standard q r policy to allow for two different lot sizes q1 and q2 and two different reorder levels r1 and r2 expressions for the expected on hand inventory and the expected backorders are developed and a procedure for determining the policy parameters is given the model is validated by simulation and calculations are included which compare the average annual cost with and without emergency ordering

decentralized decision making and protocol design for recycled material flows reverse logistics networks often consist of several tiers with independent members competing at each tier this paper develops a methodology to examine the individual entity behavior in reverse production systems we consider two tiers in the network collectors and processors the collectors determine individual flow functions that relate the flow they provide each processor to the overall vector of prices that the processors determine because the exact final prices are unknown each collector solves a robust optimization formulation where the prices paid by the processors are assumed to be within given ranges the processors compete for the flow from the collectors until the nash equilibrium is reached in this competitive tier which sets the vector of prices to be offered to the collectors to demonstrate the approach a numerical example is given for a prototypical recycling network

option and forward contracting with asymmetric information valuation issues in supply chains we investigate the role of forward commitments and option contracts between a seller supplier and a buyer retailer in the presence of asymmetric information in our case both parties face price and demand uncertainty but the retailer being closer to the market has additional information about the true demand and price the supplier aware of this asymmetry and acting as a stackelberg leader designs a contracting arrangement that best meet his interest we contrast the role of forward and option contracts in this environment and identify cases where combinations of the two are dominant finally we investigate how alternative contracting arrangements alter the expected value of obtaining information that eliminates asymmetric information

analysis of supply chains with quantity based fixed incentives abstract this paper examines the use of quantity based fixed incentives to coordinate inventory decisions in a decentralized supply chain we consider a two stage supply chain of autonomous supplier and distributor and prove that the optimal ordering policy for the newsvendor distributor under fixed incentives is an s s type policy we further show that external and internal quantity based incentives can restore channel coordination in single period and channel members can benefit through arbitrary splitting of the resulting additional chain profit the single period results are extended to multiple periods and the impact of fixed incentives on the distributor s optimal stocking policy and channel efficiency are examined under three different multi period supplier strategies numerical examples are used to compare the multi period strategies and to provide additional managerial insights the results show that contrary to common belief incentive plans developed and maintained based only on current inventory data perform poorly in long term and that such incentive plans must be periodically updated to enhance their efficiency furthermore we show that high level of incentives designed to push too much inventory downstream of the supply chain can actually reduce the chain s efficiency

optimal ordering decisions with uncertain cost and demand forecast updating we determine the optimal ordering policy for a retailer who has two instants to order a seasonal product from a manufacturer prior to a single selling season while the demand is uncertain the retailer can improve the forecast by utilizing the market signals observed between the first and second instants however because of the nature of the manufacturing environment the unit cost at the second instant is uncertain and could be higher or lower than the unit cost at the first instant to determine the profit maximizing ordering strategies at both instants the retailer has to evaluate the trade off between a more accurate forecast and a potentially higher unit cost at the second instant we present a nested newsvendor model for determining the optimal order quantity at each instant and characterize the conditions under which it is optimal for the retailer to delay its order until the second instant

channel coordination using product returns for a supply chain with stochastic salvage capacity abstract we examine returns policy in a newsboy framework unlike the prior literature however we assume that both supplier and retailer have limited and stochastic salvage capacities we first analyze the case of integrated supply chain in which the agents decisions are fully coordinated for the joint profits the result prescribes a partial returns policy in which the retailer returns a part of the leftovers to the supplier and liquidates the remainder through its clearance sale in a decentralized system the supplier should motivate the retailer to duplicate the outcome of the integrated system in choosing order and returns quantities we propose three coordination contracts of which each uses two benefit transfer schemes as an incentive to the retailer instead of using a single benefit scheme as in the prior literature all three effectively coordinate the supply chain the supplier as a stakelberg leader chooses the most profitable one since each contract yields the different shares of the agents profits

the quantity flexibility contract and supplier customer incentives consider a supply chain consisting of two independent agents a supplier e g a manufacturer and its customer e g a retailer the latter in turn serving an uncertain market demand to reconcile manufacturing procurement time lags with a need for timely response to the market such supply chains often must commit resources to production quantities based on forecasted rather than realized demand the customer typically provides a planning forecast of its intended purchase which does not entail commitment benefiting from overproduction while not bearing the immediate costs the customer has incentive to initially overforecast before eventually purchasing a lesser quantity the supplier must in turn anticipate such behavior in its production quantity decision this individually rational behavior results in an inefficient supply chain this paper models the incentives of the two parties identifying causes of inefficiency and suggesting remedies particular attention is given to the quantity flexibility qf contract which couples the customer s commitment to purchase no less than a certain percentage below the forecast with the supplier s guarantee to deliver up to a certain percentage above under certain conditions this method can allocate the costs of market demand uncertainty so as to lead the individually motivated supplier and customer to the systemwide optimal outcome we characterize the implications of qf contracts for the behavior and performance of both parties and the supply chain as a whole