An Integrated Model with Variable Production and Demand Rate under Inflation

AbstractIn this article, an integrated model is developed in which a manufacturer purchases raw materials from a supplier, and then produces finished products/goods, after that delivers them to a buyer. In the intended model production rate is assumed as a function of demand rate and customer demand rate is time dependent. To make the model more realistic the effect of inflation and time value of money is also taken into consideration. The concept of the model is illustrated through the numerical example and sensitivity analysis with respect to the system parameters is also performed

Strategic Inventories in a Supply Chain with Vertical Control and Downstream Cournot Competition

Strategic Inventory (SI) has been an area of increased interest in theoretical supply chain literature recently. Most of the work so far however, has only considered a supply chain without downstream competition between retailers. Competition is ubiquitous in most market situations, hence, interactions between SI and retailer competition merits study as a first step in bringing the conversations and insights from this stream of literature to the real world. We present here a two-period and a three-period model of one manufacturer supplying an identical product to two retailers who form a Cournot duopoly. We also study a Commitment contract, where the manufacturer commits to all the selling seasons’ wholesale prices at the beginning of the 1st period. Commitment contracts have been shown previously to eliminate SI carriage over two selling seasons in the absence of retailer competition. We aim to deduce if this type of contract has the same effect in the presence of downstream competition. We determine closed-form Nash Equilibrium decision variable values for each of these models using game-theoretic modeling, a price-dependent linear demand function, and backward induction. We find that, the introduction of downstream Cournot duopoly competition leads to lower profits for both the manufacturer and retailer. This holds, whether the number of selling season is two or three. Consumer Surplus is also uniformly lower under retailer competition, compared to a downstream monopoly supply chain. When we try to deduce the effect of SI carriage under Cournot duopoly competition, by comparing an SC with Cournot duopoly competition and SI allowed between periods, to a similar SC with a Cournot duopoly downstream and a static, repeating, one-shot game in each period, with no SI carried – we find again that manufacturer and retailer profits are both lower when SI carriage is allowed. This holds whether the number of selling seasons is two or three. Consumer Surplus is also lower uniformly over both two and three selling seasons. Under a Commitment contract, over two selling seasons, the manufacturer ends up with an advantage, making a higher profit with downstream retailer competition, than compared to supplying to a monopoly downstream under the same contract. The retailers, while competing as a Cournot duopoly, are not able to use the relative advantage that comes from a Commitment contract to make a higher profit, as they are, when the downstream is a single retailer monopoly. The consumer also is disadvantaged by the introduction of downstream Cournot competition under a Commitment contract. When we compare a manufacturer supplying to a Cournot duopoly downstream of retailers, with, and without a Commitment contract (dynamic ordering), we see that the manufacturer and consumer benefit under a Commitment contract, making higher profits, but the retailer is at a disadvantage. It would be an interesting extension of this work to generalize the results from two and three selling seasons, presented here, to the “n” period case. It would also be benefi-cial to run empirical studies in real-world supply chains to validate if and to what extent the insights developed by this kind of game-theoretic modeling hold in a real-world supply chain setting. Development of contracts that are more effective than a Commitment con-tract in coordinating this supply chain would be another possible area for further research

Three Essays on Assortment Planning in Omni-Channel Retail Supply Chains

In omni-channel retail systems, comprising an online sales website and brick-and-mortar (physical) stores, a physical store typically faces limited shelf-space capacity, while capacity is not an issue for the online channel. Consequently, a crucial aspect of such retail systems is to choose a subset of products present online for showcasing in the physical store (i.e., assortment planning). In my first research stream, I investigate the omni-channel assortment problem when product returns are allowed. Assortment decisions influence product returns, as showcased products provide information to online shoppers who visit the physical store. Therefore, although product returns can be a factor for profit loss, effective assortment planning can mitigate the returns’ adverse impact and optimize profitability. My results indicate that even with sufficient capacity, showcasing all products in the physical store may not be optimal. Additionally, retailers generally fare better when customers undervalue hidden attribute levels. In my second research stream, I explore a decentralized retail supply chain (RSC) comprising an online channel managed by a manufacturer setting wholesale prices, and an independent retailer managing the physical store and making assortment decisions. As a benchmark, I examine a centralized setting where both channels are under a central authority aiming to maximize overall profit. My findings show fundamental differences in optimal centralized and decentralized assortments, indicating inefficiency in the decentralized approach. I propose scope contracts for coordination, wherein the manufacturer offers discounts on wholesale prices for products with specific attribute levels, incentivizing the retailer to adopt the centralized assortment. The scope contracts ensure both parties' profitability and coordinate the RSC. In the third stream, I suppose that the magnitude of inaccuracy in online assessment of products due to the lack of physical encounter is unknown to the RSC parties, and they make decisions with asymmetric information. I investigate the assortment and wholesale price decisions along with profit regrets. My findings under the decentralized setting indicate that while both parties cannot fare better simultaneously, each party can be advantaged under certain conditions. Under the centralized setting, when supposing accurate online assessments, showcasing an assortment of the highest utility attribute levels possibly minimizes system-wide regret