Matching Spatially Diversified Suppliers with Random Demands
Creators: Liu, Zhe
Publisher: name: Columbia University
Year: 2019
Subjects: Operations research
Business logistics
Supply and demand
Revenue management
Ridesharing--Mathematical models

description: A fundamental challenge in operations management is to dynamically match spatially diversified supply sources with random demand units. This dissertation tackles this challenge in two major areas: in supply chain management, a company procures from multiple, geographically differentiated suppliers to service stochastic demands based on dynamically evolving inventory conditions; in revenue management of ride-hailing systems, a platform uses operational and pricing levers to match strategic drivers with random, location and time-varying ride requests over geographically dispersed networks. The first part of this dissertation is devoted to finding the optimal procurement and inventory management strategies for a company facing two potential suppliers differentiated by their lead times, costs and capacities. We synthesize and generalize the existing literature by addressing a general model with the simultaneous presence of (a) orders subject to capacity limits, (b) fixed costs associated with inventory adjustments, and (c) possible salvage opportunities that enable bilateral adjustments of the inventory, both for finite and infinite horizon periodic review models. By identifying a novel, generalized convexity property, termed (C1K1, C2K2)-convexity, we are able to characterize the optimal single-source procurement strategy under the simultaneous treatment of all three complications above, which has remained an open challenge in stochastic inventory theory literature. To our knowledge, we recover almost all existing structural results as special cases of a unified analysis. We then generalize our results to dual-source settings and derive optimal policies under specific lead time restrictions. Based on these exact optimality results, we develop various heuristics and bounds to address settings with fully general lead times. The second part of this dissertation focuses on a ride-hailing platform's optimal control facing two major challenges: (a) significant demand imbalances across the network, and (b) stochastic demand shocks at hotspot locations. Towards the first major challenge, which is evidenced by our analysis of New York City taxi trip data, the dissertation shows how the platform's operational controls--including demand-side admission control and supply-side empty car repositioning--can improve system performance significantly. Counterintuitively, it is shown that the platform can improve the overall value through strategic rejection of demand in locations with ample supply capacity (driver queue). Responding to the second challenge, a demand shock of uncertain duration, we show how the platform can resort to surge pricing and dynamic spatial matching jointly, to enhance profits in an incentive compatible way for the drivers. Our results provide distinctive insights on the interplay among the relevant timescales of different phenomena, including rider patience, demand shock duration and drivers' traffic delay to the hotspot, and their impact on optimal platform operations.