Effective sourcing strategies for perishable product supply chains

Purpose – The purpose of this paper is to assess whether an existing sourcing strategy can effectively supply products of appropriate quality with acceptable levels of product waste if applied to an international perishable product supply chain. The authors also analyse whether the effectiveness of this sourcing strategy can be improved by including costs for expected shelf life losses while generating order policies. Design/methodology/approach – The performance of sourcing strategies is examined in a prototype international strawberry supply chain. Appropriate order policies were determined using parameters both with and without costs for expected shelf life losses. Shelf life losses during transport and storage were predicted using microbiological growth models. The performance of the resulting policies was assessed using a hybrid discrete event chain simulation model that includes continuous quality decay. Findings – The study's findings reveal that the order policies obtained with standard cost parameters result in poor product quality and large amounts of product waste. Also, including costs for expected shelf life losses in sourcing strategies significantly reduces product waste and improves product quality, although transportation costs rise. Practical implications – The study shows that in perishable product supply chain design a trade-off should be made between transportation costs, shortage costs, inventory costs, product waste, and expected shelf life losses. Originality/value – By presenting a generically applicable methodology for perishable product supply chain design, the authors contribute to research and practice efforts to reduce food waste. Furthermore, product quality information is included in supply chain network design, a research area that is still in its infancy

Revenue Management and Demand Fulfillment: Matching Applications, Models, and Software

Recent years have seen great successes of revenue management, notably in the airline, hotel, and car rental business. Currently, an increasing number of industries, including manufacturers and retailers, are exploring ways to adopt similar concepts. Software companies are taking an active role in promoting the broadening range of applications. Also technological advances, including smart shelves and radio frequency identification (RFID), are removing many of the barriers to extended revenue management. The rapid developments in Supply Chain Planning and Revenue Management software solutions, scientific models, and industry applications have created a complex picture, which appears not yet to be well understood. It is not evident which scientific models fit which industry applications and which aspects are still missing. The relation between available software solutions and applications as well as scientific models appears equally unclear. The goal of this paper is to help overcome this confusion. To this end, we structure and review three dimensions, namely applications, models, and software. Subsequently, we relate these dimensions to each other and highlight commonalities and discrepancies. This comparison also provides a basis for identifying future research needs.Manufacturing;Revenue Management;Software;Advanced Planning Systems;Demand Fulfillment

Pricing and Revenue Management

The focus of this chapter is on the strategic role of price in revenue management (RM). In order to successfully use price as a strategic weapon, firms must address two questions: what prices to charge and how’ to determine which customers or market segments should be offered those prices. In addition, companies must study and understand both customer and competitive reaction to their use of RM pricing. In this chapter, I address these questions through a review of the relevant literature and of current practice

Revenue Management and Demand Fulfillment: Matching Applications, Models, and Software

Recent years have seen great successes of revenue management, notably in the airline, hotel, and car rental business. Currently, an increasing number of industries, including manufacturers and retailers, are exploring ways to adopt similar concepts. Software companies are taking an active role in promoting the broadening range of applications. Also technological advances, including smart shelves and radio frequency identification (RFID), are removing many of the barriers to extended revenue management. The rapid developments in Supply Chain Planning and Revenue Management software solutions, scientific models, and industry applications have created a complex picture, which appears not yet to be well understood. It is not evident which scientific models fit which industry applications and which aspects are still missing. The relation between available software solutions and applications as well as scientific models appears equally unclear. The goal of this paper is to help overcome this confusion. To this end, we structure and review three dimensions, namely applications, models, and software. Subsequently, we relate these dimensions to each other and highlight commonalities and discrepancies. This comparison also provides a basis for identifying future research needs

Entropy-based Demand Splits in a Hospital-Warehouse Profit Center

Financial pressures on healthcare industry in the United States and elsewhere have forced the industry to address their supply costs, their fastest growing cost sector currently comprising over 40 % of their total spend. In the USA, the healthcare supplies market is dominated by a few large distributors and significant barriers to entry. Cost reducing measures to date have relied on Group Purchasing Organizations to leverage economies of scale in negotiating price reductions. Recently, the healthcare industry has been deemphasizing this practice. In doing so, healthcare organizations have merged to form large Integrated Delivery Networks, leveraging their collective purchasing capacity to negotiate price reductions. These organizations have essentially created their own internal Group Purchasing Organizations to compete with external suppliers. Although these ventures have been publicized to be “successful”, their overall success cannot be independently validated. Furthermore, the operational details of creating these ventures, financial analyses, and operations are not publically available. Our ultimate objective is to model the creation of ventures in which healthcare organizations enter price competitions with their external vendors using the currently prevalent market parameters and practices. Specifically, the models would identify and quantitate the parameters that determine venture success, here referred to as Venture Success Metrics. Such models would comprise multiple external suppliers of different products that belong to different categories. This thesis is our first step towards that objective. It represents a simplified venture in which the hospital runs its own warehouse as a profit center that competes with one external vendor on a single supply item. The model is based on currently prevalent healthcare industry practices. In particular, it incorporates discount schedules that accurately account for the unique healthcare industry practice of offering year-2 volume-based discounts based on year-1 volumes, restricted only to the contract period. Modeling a simplified venture enabled us to identify and quantitate the parameters that determine venture success. These parameters comprise the vendor and warehouse year-1 profit objectives as well as the bias of the hospital’s purchases from its own warehouse. Pursuing the models of the thesis induced the development of healthcare-relevant sigmoidal discount schedules. These functions accurately represent the tabular step-function discount schedules while averting the infinite and discontinuous derivatives of the latter. Their “continuous derivatives” advantage renders the sigmoidal discounts readily useable in computing price equilibria, a feat that was not easily achievable with the rigid step-function discounts. The thesis also introduces novel demand split functions in which a customer’s total demand can be equitably apportioned across all suppliers subject to diverse business objectives such as price constraints or biasing purchases in favor of one or more suppliers while retaining equitability. The ultimate economic goal for achieving equitability is to conserve supply source. The demand split methodology introduced in this thesis can be characterized as “achieving equitability under business constraints”. A series of examples are provided to illustrate the methods developed in this research. Finally, the thesis concludes with a synopsis of the findings and future extensions.1 yea

Cooperative Wool Marketing Pools and Warehouses: Industry Update, Issues and Options

In 1981, there were 158 cooperative wool marketing pools and 9 cooperative warehouses. Pools operate a few days each year to assemble and sell wool. Warehouses operate daily and also grade, store, and blend wool to buyer specifications. Pools frequently sell without knowledge of grade and clean fiber content. Producer bargaining power is also limited by declining wool production, large variation in pool membership and volume, and overlapping marketing territories among warehouses. Processing, consolidating pool and warehouse marketing, and changing pool pricing to reflect clean fiber content are options to lower marketing costs and better market power.Wool, cooperative, pool, Agribusiness,

Technological Changes in the Transportation Sector--Effects on U.S. Food and Agricultural Trade: A Proceedings

ERS sponsored a workshop, Technological and Structural Change in the Transportation Sector: Effects on U.S. Food and Agricultural Trade, March 17-18, 1999, in Washington, DC. The program's objectives were to raise awareness within ERS about the role and importance of transportation in U.S. food and agricultural trade and to discuss the need of an agency research agenda in this area. More than 60 people attended. Bob Thompson of the World Bank and Jeffrey Frankel of the Brookings Institution led with discussions about the role of transportation in the global food system and the importance of integrating geography and transportation in analysis of international trade. Other panels dealt with transportation technology, past and future, the changing policy environment for ocean shipping, logistical and technological developments aiding exports of specific commodities, including the use of supply chain management. Representatives of the Agricultural Marketing Service discussed the availability of transportation cost data, and the availability of other shipping data was discussed by representatives of the PIERS database, a product of the Journal of Commerce. Two ERS research projects were summarized, one using GTAP and another applying the gravity model to estimate the extent to which distance is less of an inhibiting factor in exporting certain U.S. agricultural exports. The administrator of the Agricultural Marketing Service, the ERS associate administrator, and representatives of the Transportation Research Board, the USDA's World Board, and the Farm Foundation discussed potential ways ERS could include the transportation variable in its research. The program was cosponsored by the Farm Foundation and World Perspectives, Inc.transportation, distance, technology, agricultural trade, United States, Public Economics, Research and Development/Tech Change/Emerging Technologies,

Revenue Management: Advanced Strategies and Tools to Enhance Firm Profitability

Much of the past research on revenue management (RM) has focused on forecasting and optimization models and, more recently, on adaptation of RM to the specific needs in various industries, such as restaurants, car rental, transport and even health care services. Surprisingly, although many industries have become increasingly customer-focused, the customer seems to have been relatively forgotten in this stream of research. Our intent in this monograph is to help explore the role of marketing in RM in more depth

Capital Democratization

Although, the ideas underlying binary economics were first published in 1958 (Kelso and Adler), the many books and papers that discuss the subject, with the exception of Kane (2000) and Kurland (2001), do not utilize conventional economics language. To facilitate the teaching of binary economics in beginning and intermediate college courses in economics and business, the paper explains some major microeconomic and macroeconomic fundamentals of binary economics by utilizing conventional neo-classical economic models. It then compares the theoretical results reached in a non-binary economic environment to those that may be reached in a binary one. The most important result from the comparison is that, as compared with the binary environment, in a non-binary environment, the economy would employ less than full potential capital and thus generate less than optimum output, consumption, saving and investment. The authors hope the article will help the reader to (a) understand the binary principles and (b) analyze the \u27binary promise\u27 of greater growth based on a broader distribution of capital ownership

Dynamic Pricing of Limited Inventories When Customers Negotiate

Although take-it-or-leave-it pricing is the main mode of operation for many retailers, a number of retailers discreetly allow price negotiation when some haggle-prone customers ask for a bargain. At these retailers, the posted price, which itself is subject to dynamic adjustments in response to the pace of sales during the selling season, serves two important roles: (i) it is the take-it-or-leave-it price to many customers who do not bargain, and (ii) it is the price from which haggle-prone customers negotiate down. In order to effectively measure the benefit of dynamic pricing and negotiation in such a retail environment, one must take into account the interactions among inventory, dynamic pricing, and negotiation. The outcome of the negotiation (and the final price a customer pays) depends on the inventory level, the remaining selling season, the retailer's bargaining power, and the posted price. We model the retailer's dynamic pricing problem as a dynamic program, where the revenues from both negotiation and posted pricing are embedded in each period. We characterize the optimal posted price and the resulting negotiation outcome as a function of inventory and time. We also show that negotiation is an effective tool to achieve price discrimination, particularly when the inventory level is high and/or the remaining selling season is short even when implementing negotiation is costly.http://deepblue.lib.umich.edu/bitstream/2027.42/85781/1/1159_Ahn.pd