Information and Inventory Recourse for a Two-Market, Price-Setting Retailer

We analyze the problem of determining inventory and pricing decisions in a two-period retail setting when an opportunity to refine information about uncertain demand is available. The model extends the newsvendor problem with pricing by allowing for multiple suppliers, the pooling of procurement resources, and more general informational dynamics. One contribution is the solution procedure: we show that all decisions (up to seven in all, including recourse decisions) can be determined uniquely as a function of a surrogate first-period decision called the stocking factor. Hence, the two-period decision problem with recourse reduces to a search for one .decision variable. A second contribution is the policy implications: we find that the cost of learning is (I) a consequence of censored information because, on the margin, learning is free if full information is guaranteed; (2) measured in the form of an increased stocking factor; and (3) shared with the consumer in. the form of a higher selling price when demand uncertainty is additive. A third contribution is the application of the results to three motivating examples: A market research problem in which a product is introduced in a test market prior to a widespread launch; a global newsvendor problem in which a seasonal product is sold in two different countries with non-overlapping selling seasons; and a minimum-quantity commitment problem in which procurement resources for multiple purchases may be pooled

A Practical Guide to Robust Optimization

Robust optimization is a young and active research field that has been mainly developed in the last 15 years. Robust optimization is very useful for practice, since it is tailored to the information at hand, and it leads to computationally tractable formulations. It is therefore remarkable that real-life applications of robust optimization are still lagging behind; there is much more potential for real-life applications than has been exploited hitherto. The aim of this paper is to help practitioners to understand robust optimization and to successfully apply it in practice. We provide a brief introduction to robust optimization, and also describe important do's and don'ts for using it in practice. We use many small examples to illustrate our discussions

Integrating anticipative replenishment-allocation with reactive fulfillment for online retailing using robust optimization

Ministry of Education, Singapore under its Academic Research Funding Tier 1; Lee Kong Chian Fellowship; MPA Research Fellowshi

STACKELBERG LEADERSHIP AND EFFECTIVENESS OF DEMAND DISRUPTION MANAGEMENT IN A THREE-TIER ELECTRONICS SUPPLY CHAIN

Management of electronics supply chains has become increasingly complicated due to both a rising dependence on Contract Electronics Manufacturers (CEMs) and the increased dominance of retailing giants. This paper analyzes the effects of different leadership structures on the relative profit of each member of a three-tier electronics supply chain that consists of a CEM, an Original Equipment Manufacturer (OEM), and a Retailer. Our decentralized supply chain setting is governed by a wholesale price contract, and we assume that each supply chain member faces an increasing marginal unit cost function. We conduct a comparative analysis with a centralized supply chain (i.e., a vertically integrated company with business divisions acting as CEM, OEM, and Retailer). Three different demand functions are considered: linear, exponential, and stochastic. Our results show that supply chains in which the Retailer acts as the Stackelberg leader have the highest optimum profit regardless of the demand function. Results also show that the allocation of unit cost between the CEM, OEM and Retailer affects the profit distribution profile. Finally, we also study the effectiveness of demand disruption management in the decentralized supply chain setting where the OEM is the leader. A penalty cost is incurred by the Retailer when a demand disruption occurs, i.e. when actual demand deviates from the original forecast. We find exact analytical solutions of the effectiveness of managing disruptions when the consumer demand is linear, and we provide numerical examples as an illustration when the consumer demand is either linear or exponential

E-grocery challenges and remedies: Global market leaders perspective

The purpose of the study is to identify logistic elements germane to e-grocery businesses, and to reveal the challenges collateral with each logistic element. Further, it strives to create a better understanding of specific remedies that have been employed by top e-grocery retailers to overcome existing challenges while aligning identified challenges with Turban’s framework. Extensive semi-structured interviews were conducted with management staff in three of the top ten global online grocery retailers and another that was a market leader in a European country. The qualitative data collected was transcribed and coded using a non-hierarchical axial coding to identify emerging themes in content analysis. The results expose a range of challenges that could be compartmentalised into three broad categories, in harmony with the different stages of the order fulfilment process. Interestingly, the study found that most challenges were operational rather than tactical or strategic in nature. While the study expands existing knowledge, its revelation that most challenges lie in the management of roles and responsibilities domain is instructive. This makes it imperative for practitioners to focus on this specific area if meaningful improvement in e-grocery retailing performance is to be realised. This research offers a systematic understanding of supply and distribution challenges, including remedies utilised to ameliorate the effect of the challenges from the perspectives of the top companies in the industry. These remedies can be invaluable for existing and emerging e-grocers