Publisher Summary This chapter reviews the supply chain coordination with contracts. Numerous supply chain models are discussed. In each model, the supply chain optimal actions are identified. The chapter extends the newsvendor model by allowing the retailer to choose the retail price in addition to the stocking quantity. Coordination is more complex in this setting because the incentives provided to align one action might cause distortions with the other action. The newsvendor model is also extended by allowing the retailer to exert costly effort to increase demand. Coordination is challenging because the retailer's effort is noncontractible—that is, the firms cannot write contracts based on the effort chosen. The chapter also discusses an infinite horizon stochastic demand model in which the retailer receives replenishments from a supplier after a constant lead time. Coordination requires that the retailer chooses a large basestock level.

Supply Chain Coordination with Contracts

Many companies have embarked on initiatives that enable more demand information sharing between retailers and their upstream suppliers. While the literature on such initiatives in the business press is proliferating, it is not clear how one can quantify the benefits of these initiatives and how one can identify the drivers of the magnitudes of these benefits. Using analytical models, this paper aims at addressing these questions for a simple two-level supply chain with nonstationary end demands. Our analysis suggests that the value of demand information sharing can be quite high, especially when demands are significantly correlated over time.

The Value of Information Sharing in a Two-Level Supply Chain

Perspectives in supply chain risk management

Remaining useful life estimation - A review on the statistical data driven approaches

This paper presents a polynomial dimensional decomposition (PDD) method for global sensitivity analysis of stochastic systems subject to independent random input following arbitrary probability distributions. The method involves Fourier-polynomial expansions of lower-variate component functions of a stochastic response by measure-consistent orthonormal polynomial bases, analytical formulae for calculating the global sensitivity indices in terms of the expansion coefficients, and dimension-reduction integration for estimating the expansion coefficients. Due to identical dimensional structures of PDD and analysis-of-variance decomposition, the proposed method facilitates simple and direct calculation of the global sensitivity indices. Numerical results of the global sensitivity indices computed for smooth systems reveal significantly higher convergence rates of the PDD approximation than those from existing methods, including polynomial chaos expansion, random balance design, state-dependent parameter, improved Sobol’s method, and sampling-based methods. However, for non-smooth functions, the convergence properties of the PDD solution deteriorate to a great extent, warranting further improvements. The computational complexity of the PDD method is polynomial, as opposed to exponential, thereby alleviating the curse of dimensionality to some extent. Mathematical modeling of complex systems often requires sensitivity analysis to determine how an output variable of interest is influenced by individual or subsets of input variables. A traditional local sensitivity analysis entails gradients or derivatives, often invoked in design optimization, describing changes in the model response due to the local variation of input. Depending on the model output, obtaining gradients or derivatives, if they exist, can be simple or difficult. In contrast, a global sensitivity analysis (GSA), increasingly becoming mainstream, characterizes how the global variation of input, due to its uncertainty, impacts the overall uncertain behavior of the model. In other words, GSA constitutes the study of how the output uncertainty from a mathematical model is divvied up, qualitatively or quantitatively, to distinct sources of input variation in the model [1].

Reliability Engineering and System Safety

We study the problem of inventory management for a buyer whose ordering is governed by a multi-period adjustment contract that allows the buyer to adjust his inventory level upwards or downwards during an ordering period. Under this type of arrangement, the buyer has added flexibility in inventory control so as to reduce his inventory risk. This flexibility, however, comes at a cost, i.e. at a higher price per unit of inventory bought and a lower price per unit of inventory sold during an ordering period. A supply contract of this type provides the additional ordering flexibility buyers often demand, while allowing the supplier to charge for the additional cost associated with this flexibility. We prove the structure of the optimal inventory policy for a buyer who procures inventory under a portfolio of supply contracts, consisting of a wholesale price contract and an adjustment contract. We then extend our analysis to consider positive lead times and fixed order costs. Finally, we quantify the benefits o...

https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=1473&context=lkcsb_research

Inventory Flexibility through Adjustment Contracts

Given the growth in socially conscious consumption, firms are increasingly concerned with sourcing from responsible suppliers. However, a firm’s sourcing decisions are not always apparent to consumers. Therefore, we investigate two mechanisms, signaling and disclosure, which a firm can use to communicate its sourcing decisions to consumers in a setting where only some consumers care about the firm’s sourcing practices. We develop a supplier selection model with an embedded game in which the firm signals its supplier choice through price. Then, motivated by the observation that some firms have begun to disclose their supplier information, we consider a model in which the firm may voluntarily disclose information, but at a cost. We find that, under signaling alone, a firm which sources from a more responsible supplier may distort its price upward to signal its responsible sourcing. This leads to reduced profit, implying that the firm may have an incentive to source from a less responsible supplier. However, if supplier disclosure is an option, the firm will choose to source responsibly if the disclosure cost is small and the proportion of socially conscious consumers is large. Our findings highlight the importance of transparency and socially conscious consumption in driving responsible sourcing.

Responsible Sourcing under Asymmetric Information: Price Signaling versus Supplier Disclosure

In manufacturing, queue-time constraints occur when a set of consecutive process steps must be completed within a fixed time window. Such constraints are common in semiconductor manufacturing, particularly in the diffusion area. Violations of queue-time constraints can lead to rework, scrap and longer cycle times. These constraints add significant complexity to the already difficult problem of scheduling in a semiconductor fab. In this paper, we consider the gate-keeping decision. Given a job arriving at a queue-time zone, the decision to be made is whether and when the job should be allowed to enter the zone. To make this decision, we propose a mixed integer linear programming model of the local scheduling problem within the queue-time zone. Because the gate-keeping decision is made at a higher level than detailed scheduling, our local scheduling model is simplified, i.e., it does not incorporate issues such as batching. This simplification allows us to consider a larger set of arriving jobs when making the gate-keeping decision. We propose two alternative model formulations, time- and slot-based, for the local scheduling problem. We compare the performance of these two formulations using a set of numerical experiments generated based on process flow information from an actual semiconductor fab.

Production Scheduling with Queue-time Constraints: Alternative Formulations

Impact of Organizational Structure on Development Strategy under Equity‐Based Incentives

Problem definition: Inspired by new developments in dynamic spectrum access, we study the dynamic pricing of wireless Internet access when demand and capacity (bandwidth) are stochastic. Academic/p...

/pdf/dynamic-pricing-of-wireless-internet-based-on-usage-and-42nk1flbyk.pdf

Jennifer K. Ryan

Papers

Inventory Flexibility through Adjustment Contracts

Responsible Sourcing under Asymmetric Information: Price Signaling versus Supplier Disclosure

Production Scheduling with Queue-time Constraints: Alternative Formulations

Impact of Organizational Structure on Development Strategy under Equity‐Based Incentives

Dynamic Pricing of Wireless Internet Based on Usage and Stochastically Changing Capacity