Applying Revenue Management to the Reverse Supply Chain

We study the disposition decision for product returns in a closed-loop supply chain. Motivated by the asset recovery process at IBM, we consider two disposition alternatives. Returns may be either refurbished for reselling or dismantled for spare parts. Reselling a refurbished unit typically yields higher unit margins. However, demand is uncertain. A common policy in many firms is to rank disposition alternatives by unit margins. We show that a revenue management approach to the disposition decision which explicitly incorporates demand uncertainty can increase profits significantly. We discuss analogies between the disposition problem and the classical airline revenue management problem. We then develop single period and multi-period stochastic optimization models for the disposition problem. Analyzing these models, we show that the optimal allocation balances expected marginal profits across the disposition alternatives. A detailed numerical study reveals that a revenue management approach to the disposition problem significantly outperforms the current practice of focusing exclusively on high-margin options, and we identify conditions under which this improvement is the highest. We also show that the value recovered from the returned products critically depends on the coordination between forward and reverse supply chain decisions.remanufacturing;revenue management;onderdelen;revenues;spare parts inventory

The strategic integration of agile and lean supply

Lean supply is closely associated with enabling flow and the elimination of wasteful variation within the supply chain. However, lean operations depend on level scheduling and the growing need to accommodate variety and demand uncertainty has resulted in the emergence of the concept of agility. This paper explores the role of inventory and capacity in accommodating such variation and identifies how TRIZ separation principles and TOC tools may be combined in the integrated development of responsive and efficient supply chains. A detailed apparel industry case study is used to illustrate the application of these concepts and tools

Quantifying the efficiency of price-only contracts in push supply chains over demand distributions of known supports

In this paper, we quantify the efficiency of price-only contracts in supply chains with demand distributions by imposing prior knowledge only on the support, namely, those distributions with support [a, b] for 0 < a <_ b < +1. By characterizing the price of anarchy (PoA) under various push supply chain configurations, we enrich the application scope of the PoA concept in supply chain contracts along with complementary managerial insights. One of our major findings is that our quantitative analysis can identify scenarios where the price-only contract actually maintains its efficiency, namely, when the demand uncertainty, measured by the relative range b/a, is relatively low, entailing the price-only contract to be more attractive in this regard

Online marketing:When to offer a refund for advanced sales

Advance selling is a marketing strategy commonly used by online retailers to increase sales by exploiting consumer valuation uncertainty. Recently, some online retailers have started to allow refunds on products sold in advance. On the one hand this reduces the net advance sales, but on the other hand it allows a higher advance sales price. This research is the first to explore the overall effect of allowing a refund on profits from advance sales, identifying conditions where advance selling with or without refunds (or no advance selling at all) is best. We analytically compare the profits of three advance selling strategies: none, without refund, and with refund. We show that selling in advance and allowing a refund is optimal for products with a relatively small profit margin and small strategic market size, and that the added profit can be considerable. Our results guide managers in selecting the right advance selling strategy. To facilitate this, we graphically display, based on the two dimensions of regular profit margin and strategic market size, under what conditions the different strategies are optimal

Managing the trade-off implications of global supply

The cost versus response trade-off is a growing logistics issue due to many markets being increasingly characterized by demand uncertainty and shorter product life cycles. This is exacerbated further with supply increasingly moving to low cost global sources. However, the poor response implications of global supply are often not addressed or even acknowledged when undertaking such decisions. Consequently, various practical approaches to minimising, postponing or otherwise managing the impact of the demand uncertainty are often only adopted retrospectively. Even though such generic solutions are documented through case examples we lack effective tools and concepts to support the proactive identification and resolution of such trade-offs. This paper reports on case-based theory building research, involving three cases from the UK and USA used in developing a conceptual model with associated tools, in support of such a process

Essays in inventory decisions under uncertainty

Uncertainty is a norm in business decisions. In this research, we focus on the inventory decisions for companies with uncertain customer demands. We first investigate forward buying strategies for single stage inventory decisions. The situation is common in commodity industry where prices often fluctuate significantly from one purchasing opportunity to the next and demands are random. We propose a combined heuristic to determine the optimal number of future periods a firm should purchase at each ordering opportunity in order to maximize total expected profit when there is uncertainty in future demand and future buying price. Second, we study the complexities of bundling of products in an Assemble-To-Order (ATO) environment. We outline a salvage manipulator mechanism that coordinates the decentralized supply chain. Third, we extend our salvage manipulator mechanism to a two stage supply chain with a long cumulative lead time. With significant lead times, the assumption that the suppliers all see the same demand distribution as the retailer cannot be used.Ph.D.Committee Chair: Yih-Long Chang; Committee Member: Paul Griffin; Committee Member: Ravi Subramanian; Committee Member: Soumen Ghosh; Committee Member: Srinagesh Gavirnen