970 research outputs found

    Applying Revenue Management to the Reverse Supply Chain

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    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

    Overview and classification of coordination contracts within forward and reverse supply chains

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    Among coordination mechanisms, contracts are valuable tools used in both theory and practice to coordinate various supply chains. The focus of this paper is to present an overview of contracts and a classification of coordination contracts and contracting literature in the form of classification schemes. The two criteria used for contract classification, as resulted from contracting literature, are transfer payment contractual incentives and inventory risk sharing. The overview classification of the existing literature has as criteria the level of detail used in designing the coordination models with applicability on the forward and reverse supply chains.Coordination contracts; forward supply chain; reverse supply chain

    Virtual transshipments and revenue-sharing contracts in supply chain management

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    This dissertation presents the use of virtual transshipments and revenue-sharing contracts for inventory control in a small scale supply chain. The main objective is to maximize the total profit in a centralized supply chain or maximize the supply chain\u27s profit while keeping the individual components\u27 incentives in a decentralized supply chain. First, a centralized supply chain with two capacitated manufacturing plants situated in two distinct geographical regions is considered. Normally, demand in each region is mostly satisfied by the local plant. However, if the local plant is understocked while the remote one is overstocked, some of the newly generated demand can be assigned to be served by the more remote plant. The sources of the above virtual lateral transshipments, unlike the ones involved in real lateral transshipments, do not need to have nonnegative inventory levels throughout the transshipment process. Besides the theoretical analysis for this centralized supply chain, a computational study is conducted in detail to illustrate the ability of virtual lateral transshipments to reduce the total cost. The impacts of the parameters (unit holding cost, production cost, goodwill cost, etc.) on the cost savings that can be achieved by using the transshipment option are also assessed. Then, a supply chain with one supplier and one retailer is considered where a revenue-sharing contract is adopted. In this revenue-sharing contract, the retailer may obtain the product from the supplier at a less-than-production-cost price, but in exchange, the retailer must share the revenue with the supplier at a pre-set revenuesharing rate. The objective is to maximize the overall supply chain\u27s total profit while upholding the individual components\u27 incentives. A two-stage Stackelberg game is used for the analysis. In this game, one player is the leader and the other one is the follower. The analysis reveals that the party who keeps more than half of the revenue should also be the leader of the Stackelberg game. Furthermore, the adoption of a revenue-sharing contract in a supply chain with two suppliers and one retailer under a limited amount of available funds is analyzed. Using the revenue-sharing contract, the retailer pays a transfer cost rate of the production cost per unit when he obtains the items from the suppliers, and shares the revenue with the suppliers at a pre-set revenue-sharing rate. The two suppliers have different transfer cost rates and revenue-sharing rates. The retailer will earn more profit per unit with a higher transfer cost rate. How the retailer orders items from the two suppliers to maximize his expected profit under limited available funds is analyzed next. Conditions are shown under which the optimal way the retailer orders items from the two suppliers exists

    Applying Revenue Management to the Reverse Supply Chain

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    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

    Structural and Pricing Decisions in Manufacturing/Remanufacturing Systems with Vertically Differentiated Products

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    This research encompasses three related papers to address some of the influencing factors in structural and pricing decisions in supply chains with manufacturing and remanufactunng. We consider new and remanufactured products that are vertically differentiated, that is, the consumers perceive the remanufactured product as of a lower quality and thus they are not willing to pay for them as much as they would for the new product. Examples of such products are seen in computer systems, automotive parts and office equipment. In the first paper, we consider a closed loop supply chain that includes a manufacturer, a remanufacturer and a retailer. We investigate the pricing decisions for the new and remanufactured products under different coordination structures between members of the chain while taking into account the consumers’ perception of the remanufactured product versus new and the quality of returns as two major parameters. In addition, we find which coordination structure is a better option for the closed loop supply chain members. Particularly, we find that although a lower price is charged for the new product when the retailer and the remanufacturer are coordinated (RREMC) compared to the completely decentralized (CD) structure, a higher number of new products are sold in the completely decentralized structure. A similar result is found for the remanufactured product when comparing the CD structure with the one in which the retailer and manufacturer are coordinated (MRC). We also find that MRC results in the highest total profit while RREMC results in the lowest. In the second paper, we analyze the pricing decisions for a firm that produces both new and remanufactured products and also collects the used product returns (known as cores, which are used in remanufacturing). The firm needs to define the core acquisition price as well as the selling prices for both new and remanufactured products. In our models, we capture the quality of returns (by assuming a stochastic collection yield rate) and the competition between new and remanufactured products, and show how they influence the optimal expected prices and profit of the firm. We provide managerial insight on how varying the optimal prices could help the firm optimally accommodate for different conditions (i.e. with respect to changes in the consumers’ perceptions of the products, the yield rate, and the salvage value of the cores). For example, we find that when the firm sells low margin products, a small change in the consumers’ perception of the remanufactured products versus new could increase the firm’s expected profit by more than 10%. Finally, in the third paper, we consider two core collection structures for a firm that produces both new and remanufactured products. In the first structure (known as the centralized channel), the firm collects the cores directly from the consumers, while in the second structure (known as the decentralized channel), the firm uses a third-party collector to take care of the core acquisition We assume that the demands for new and remanufactured products are influenced by the product prices and also by a stochastic component. We jointly find the optimal prices and lot sizes for each product and investigate the impact of the competition between products (i.e. consumers’ perception of the remanufactured product versus new), the quality of returns (i.e. the collection yield rate) and the demand uncertainties on the optimal solution in each channel. Furthermore, we compare the channels on the amount of change in their optimal values and expected profits with respect to changes in the parameters We also provide managerial insight on how the firm should change the optimal prices and lot sizes in each channel considering possible changes in the consumers’ perception of the products, the collection yield rate and the demand uncertainties. For example, we find that when the demand uncertainties for the new and remanufactured products are higher, the reduction in the firm’s profit is about 2-3% less in the centralized channel compared to the decentralized one

    Consumer Returns Policies and Supply Chain Performance

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    This paper develops a model of consumer returns policies. In our model, consumers face valuation uncertainty and realize their valuations only after purchase. There is also aggregate demand uncertainty, captured using the conventional newsvendor model. In this environment, consumers decide whether to purchase and then whether to return the product, whereas the seller sets the price, quantity, and refund amount. Using our model, we study the impact of full returns policies (e.g., using 100% money-back guarantees) and partial returns policies (e.g., when restocking fees are charged) on supply chain performance. Next, we demonstrate that consumer returns policies may distort incentives under common supply contracts (such as manufacturer buy-backs), and we propose strategies to coordinate the supply chain in the presence of consumer returns. Finally, we explore several extensions and demonstrate the robustness of our findings

    Essays in inventory decisions under uncertainty

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    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

    Pricing decisions for short life-cycle product in a closed-loop supply chain with random yield and random demands

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    Remanufacturing is a product recovery process that transforms a used product into “like-new” condition. It can extend the useful life of a product and help in reducing waste caused by a huge amount of short life-cycle products. Pricing decisions are an important aspect of successful remanufacturing and can secure the profitability of a firm. Remanufacturing for end-of-use products needs to cope with high uncertainties in terms of the quality and quantity of the acquired product returns. Therefore, after inspection, only a fraction of returns can be recovered through remanufacturing operations. This uncertainty in recovery yield influences the decisions impacting acquisition, wholesale, and retail prices. We propose a pricing model that accommodates the random yield effect of product returns on pricing decisions for short life-cycle products in a closed-loop supply chain. The system consists of a retailer, a manufacturer, and a collector of used-products. We apply a sequential decision approach to determine the optimum pricing decision to maximize supply chain profit, according to a pricing game that places the manufacturer as a Stackelberg leader. We demonstrate the effect of changing parameter values on the wholesale and retail prices as well as on the profitability. The results indicate that the profitability of each player and the supply chain as a whole is affected by the quality of the collected used products, the acquisition price, the shortage penalty, and the remanufacturing costs. Interestingly, reducing variance of random yield results in lower profit for the collector even though the other players and the whole supply chain are better off

    Designing coordination contracts to support efficient flow-scheduling in pork chain

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    Risk management and efficient, well coordinated, flow-scheduling have an increasingly important role in the competitive pork production networks. Changes in input and output prices have resulted in distortions in the Finnish pig markets during the last years. The goal of this study is to estimate how different price or quantity-fixing contracts affect the values of pig and sow space unit under price risk. The values are estimated with two stochastic dynamic programming models. The results suggest that a contract which is able to control both the pattern of changes in piglet prices and the option to suspend production temporarily has a value and it can help to improve the competitiveness of the pig sector. However, it is feasible to have incentives towards the contract commitment when market situation upon accepting the commitment is favourable.vo

    Mean-Variance Analysis of Supply Chain Contracts

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