Constructive solution methodologies to the capacitated newsvendor problem and surrogate extension

The newsvendor problem is a single-period stochastic model used to determine the order quantity of perishable product that maximizes/minimizes the profit/cost of the vendor under uncertain demand. The goal is to fmd an initial order quantity that can offset the impact of backlog or shortage caused by mismatch between the procurement amount and uncertain demand. If there are multiple products and substitution between them is feasible, overstocking and understocking can be further reduced and hence, the vendor\u27s overall profit is improved compared to the standard problem. When there are one or more resource constraints, such as budget, volume or weight, it becomes a constrained newsvendor problem. In the past few decades, many researchers have proposed solution methods to solve the newsvendor problem. The literature is first reviewed where the performance of each of existing model is examined and its contribution is reported. To add to these works, it is complemented through developing constructive solution methods and extending the existing published works by introducing the product substitution models which so far has not received sufficient attention despite its importance to supply chain management decisions. To illustrate this dissertation provides an easy-to-use approach that utilizes the known network flow problem or knapsack problem. Then, a polynomial in fashion algorithm is developed to solve it. Extensive numerical experiments are conducted to compare the performance of the proposed method and some existing ones. Results show that the proposed approach though approximates, yet, it simplifies the solution steps without sacrificing accuracy. Further, this dissertation addresses the important arena of product substitute models. These models deal with two perishable products, a primary product and a surrogate one. The primary product yields higher profit than the surrogate. If the demand of the primary exceeds the available quantity and there is excess amount of the surrogate, this excess quantity can be utilized to fulfill the shortage. The objective is to find the optimal lot sizes of both products, that minimize the total cost (alternatively, maximize the profit). Simulation is utilized to validate the developed model. Since the analytical solutions are difficult to obtain, Mathematical software is employed to find the optimal results. Numerical experiments are also conducted to analyze the behavior of the optimal results versus the governing parameters. The results show the contribution of surrogate approach to the overall performance of the policy. From a practical perspective, this dissertation introduces the applications of the proposed models and methods in different industries such as inventory management, grocery retailing, fashion sector and hotel reservation

Application of Optimization in Production, Logistics, Inventory, Supply Chain Management and Block Chain

The evolution of industrial development since the 18th century is now experiencing the fourth industrial revolution. The effect of the development has propagated into almost every sector of the industry. From inventory to the circular economy, the effectiveness of technology has been fruitful for industry. The recent trends in research, with new ideas and methodologies, are included in this book. Several new ideas and business strategies are developed in the area of the supply chain management, logistics, optimization, and forecasting for the improvement of the economy of the society and the environment. The proposed technologies and ideas are either novel or help modify several other new ideas. Different real life problems with different dimensions are discussed in the book so that readers may connect with the recent issues in society and industry. The collection of the articles provides a glimpse into the new research trends in technology, business, and the environment

Optimal scope of supply chain network & operations design

The increasingly complex supply chain networks and operations call for the development of decision support systems and optimization techniques that take a holistic view of supply chain issues and provide support for integrated decision-making. The economic impacts of optimized supply chain are significant and that has attracted considerable research attention since the late 1990s. This doctoral thesis focuses on developing manageable and realistic optimization models for solving four contemporary and interrelated supply chain network and operations design problems. Each requires an integrated decision-making approach for advancing supply chain effectiveness and efficiency. The first model formulates the strategic robust downsizing of a global supply chain network, which requires an integrated decision-making on resource allocation and network reconfiguration, given certain financial constraints. The second model also looks at the strategic supply chain downsizing problem but extends the first model to include product portfolio selection as a downsizing decision. The third model concerns the redesign of a warranty distribution network, which requires an integrated decision-making on strategic network redesign and tactical recovery process redesign. The fourth model simultaneously determines the operational-level decisions on job assignment and process sequence in order to improve the total throughput of a production facility unit

Optimizing strategic sourcing in the healthcare supply chain with consideration of physician preference and vendor scorecards

This research focuses on the design of a procurement model for expensive medical supplies in a healthcare supply chain. A deterministic optimization model generates recommendations for optimal purchases of products in a given planning period. The model combines common concepts of supply chain procurement such as leveraging tiered pricing, ensuring supply base diversity with phenomena unique to healthcare supply chain such as consideration of physician preference for products. The deterministic optimization model minimizes total spend over a chosen planning period with consideration of four key decision parameters: Physician preference requirements (which are imposed as rules on product substitutability), Upper limits on vendor market share to ensure a suitably diverse supply base Vendors’ performance scores to impose standards for product pricing, quality, service, etc. Quantity discount rebate parameters for bulk purchasing to help contain medical costs The optimization model reveals the extent to which higher product substitutability and lower supply base diversity may help hospitals reduce total procurement costs. Experiments with the optimization model also reveal the potential consequences of rater biases in vendor scorecards on procurement cost. The various parameter combinations listed above may be used in negotiating contracts for better pricing. In summary, this research addresses questions pertinent to healthcare supply chains concerning the possible cost of physician preference for products, the impact of subjective scorecards on procurement costs, the effect of planning period on procurement plans, and the cost of vendor diversity

The Relationship Between External Turbulence and New Product Development Practices

This dissertation considered whether new product development practices employed resolved the uncertainty and equivocality in information processing created by external turbulence. With external turbulence coming from more sources and arriving with greater frequency, this wave of change must be addressed to achieve desired project outcomes. Healthcare was the target industry for this research and respondents were selected from members of HIMSS, the Healthcare Information Management Systems Society. Five hundred sixty-three survey responses were collected about completed new product development projects. The aspects of the projects reported included the external turbulence experienced, flexible new product development practices employed, the effectiveness of information processing and the project’s outcomes. The results using all respondents did not show support for the crucial hypothesis that reduction of uncertainty and equivocality in the information processing environment leads to desired new product development outcomes. While the full respondent set did not support the main hypothesis, the subset of projects that were completed during the ramp-up of the Affordable Care Act showed the hypothesized relationship. With the Affordable Care Act ramp-up, there was a wave of change and a high volume of new information generated by external turbulence. Those organizations that were successful used their information processing capabilities to reduce uncertainty and equivocality and address the changes. Their information processing capability combined with flexible product development practices was directly related to positive new product development outcomes. The extreme example of external turbulence that occurred during the Affordable Care Act ramp-up supported the crucial hypothesis about information processing. The research also found that external turbulence is related to the positive use of flexible new product development practices and that use of those practices is directly related to desired new product development outcomes. In the presence of external turbulence, product development teams use flexible new product development practices to achieve desired project outcomes. The major implication from this study is the need by product development teams to consider external turbulence as a factor in all product plans. It was the strongest relationship reported

Explaining successful information management in small business

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Working Notes from the 1992 AAAI Spring Symposium on Practical Approaches to Scheduling and Planning

The symposium presented issues involved in the development of scheduling systems that can deal with resource and time limitations. To qualify, a system must be implemented and tested to some degree on non-trivial problems (ideally, on real-world problems). However, a system need not be fully deployed to qualify. Systems that schedule actions in terms of metric time constraints typically represent and reason about an external numeric clock or calendar and can be contrasted with those systems that represent time purely symbolically. The following topics are discussed: integrating planning and scheduling; integrating symbolic goals and numerical utilities; managing uncertainty; incremental rescheduling; managing limited computation time; anytime scheduling and planning algorithms, systems; dependency analysis and schedule reuse; management of schedule and plan execution; and incorporation of discrete event techniques

Definitions of Biodiversity and Measures of Its Value

The destruction of natural habitats has prompted concerns about the loss of biological diversity. Regrettably, however, there is no consensus among either biologists or economists on the most meaningful measures of biodiversity. Fundamentally different definitions are useful in asking fundamentally different questions. Considerable attention has been given to the value of diversity in search models. A measure of “aggregate variability” is appropriate to such models. Values derived from search models tend to be well behaved; they exhibit diminishing returns in diversity. In contrast, a definition of diversity as “relative abundance” is more appropriate to more complex objective functions. Values derived in these models are not necessarily well behaved. The differences between diversity values arising in search models and those arising from more general objectives are demonstrated. An example shows that “consistency tests” applied to measures of valuation may not be useful when diversity per se is being valued.Biological diversity; biodiversity; diversity index, abundance; search; variability, consistency; contingent valuation; diminishing returns; increasing returns

Essays in Applied Microeconomics with a Focus on Vocational Education and Training

This thesis consists of three chapters, each derived from an individual paper. Although each of these chapters deals with a unique research question, there are similarities that are strong between Chapters 1 and 2 and weak regarding the third. First, all chapters raise questions in the field of microeconomics and touch on the Swiss system of Vocational Education and Training (VET). Second, all chapters apply quantitative methods widely used in the field. And finally, all chapters are embedded in the Swiss context. Whereas this Swissness merely concerns the data in chapter three, it additionally includes the outcome of interest and the fundamentals of the empirical methodology in chapter one and two. Both Chapters 1 and 2 investigate firms' engagement in the Swiss VET system. Within this system firms' voluntary participation is crucial – they help design curricula, hire apprentices, pay their wages, and are responsible for most of their training – and remarkable: Setting a world record, Switzerland's dual VET system accepts around 60% of all pupils after compulsory schooling each year. It thus seems fair to say that Swiss firms bear a large proportion of the investments needed to secure their own future skill demand. Chapter 1, which is joint work with Andreas Kuhn, investigates what happens to this voluntary engagement in the skill formation process if firms are permitted to secure their skill demand from another source: we focus on immigration. In recent years, this channel has changed substantially, both quantitatively and qualitatively. Through mutual agreements, foremost the Agreement on the Free Movement of Persons implemented in 2002, the labor markets of Switzerland and the European Union have increasingly integrated, and the non-Swiss workforce has grown by roughly 50% or 600,000 workers since 1995. Meanwhile, most immigrant workers today hold a vocational or tertiary degree, whereas in the 1990s fewer reached educational attainments higher than compulsory schooling. Overall, we hypothesize that this enlargement of skills provided by the non-native to the Swiss labor market may incentivizes firms to substitute their investments in VET by hiring immigrant workers. To examine this claim empirically, Chapter 1 focuses on crossborder workers, who work in but live outside Switzerland. Today, crossborder workers account for 6% of the total Swiss workforce and 20% of the immigrant workforce. Moreover, their numbers doubled between 1995 and 2018, an increase twice as large in relative terms as the simultaneous increase in resident immigrant workers. To understand Switzerland's particular attraction for crossborder workers, it is first worth picturing a map of Switzerland's distinct language regions. The triangle on the left pointing towards France forms the French-speaking part. The much smaller triangle hanging upside down into Italy covers the Italian-speaking, and the rest, mostly bordering Germany and Austria, the German-speaking part. One notices that all three main Swiss language regions border countries in which they are the sole official language. Evidently, language is not a major barrier at the Swiss border within the institutionally relatively well integrated European labor market, which together with the comparatively high Swiss wages makes Switzerland attractive for workers from neighboring countries. Second, Switzerland's comparatively high cost of living together with assumed personal preferences for residing in one's country of origin makes it relatively unattractive to work and live in Switzerland. Quite obviously, the resulting high numbers of crossborder workers are not evenly distributed across Switzerland. Swiss firms' opportunities to employ them is substantially constrained by their distance from the border. The empirical approach presented in Chapter 1 exploits this setting by comparing firms close to the border with large and firms far from the border with limited access to crossborder workers that are otherwise similar. Overall, we find that the increase observed in crossborder workers between 1995 and 2008 led to a decrease of about 3,500 apprenticeship positions, corresponding to roughly 2% of the total number of apprentice positions. Although the exact channel through which this substitution works remains ambiguous, policy makers designing institutions in either immigration or VET might want to pay attention to this trade-off, especially because it involves two goods that are in general positively valued by many employers. Chapter 2, which is joint work with Andreas Kuhn and Jürg Schweri, sticks with firms' investments in VET and, moreover, also investigates the spatial distribution of it across Switzerland. The focus lies on the varying proportions of firms providing apprenticeship positions across Switzerland's language regions (that you remember when recalling the map pictured above). Note first that we do not claim there is any direct link between different languages and different levels of firm engagement in VET. However, the distinct languages in Switzerland also maintain cultural differences within a small country, despite the fact that national institutions are well accepted and people increasingly mobile. It may be due to exclusive communication with same-language peers, selective media consumption, or varying exposure to Switzerland's neighboring countries with whom each Swiss language region forms a distinct supranational linguistic region: French speakers are most open to immigration and international cooperation and eat more meat than their German-speaking counterparts. German speakers have a more traditional understanding of gender roles than their French-speaking counterparts and donate the most for charity of all linguistic groups. Italian speakers use public transport the least and value leisure more than their German-speaking counterparts. In Chapter 2, we focus on a clear discontinuity that analysis of voting results reveals among the language-cultural regions constituting Switzerland: Whereas French and Italian speakers approve of strong state involvement, for example in the health insurance sector, for pension schemes, and in the VET system, German speakers prefer private engagement over the states in the same domains. From this starting point, we ask whether a favorable attitude towards private engagement expressed at the ballot box is actually accompanied by higher levels of the privately provided good apprenticeship. Chapter 2 reveals the answer to be yes: firms located in German-speaking municipalities are about 10% more likely to train apprentices than firms in very nearby French- and Italian-speaking municipalities. Altogether, we argue that norm-guided behavior is a complementary explanation for why some firms train apprentices and others do not. One can draw two policy implications from this finding. First, persistent norms might strengthen the sustainability of the Swiss VET system against potential shocks to firms' cost-benefit ratio. Second, behavior bound by norms might hinder the export of a Swiss-style VET system with its strong focus on firm engagement to other countries even if they set up the institutional framework to foster it. Chapter 3 focuses on the adult labor market, where skills acquired, e.g. in the VET system, are applied. Many economists claim that recent rapid technological change penetrating the labor market has shifted firms' skill demand and altered the nature of jobs. Given individuals' skills, these demand shifts potentially foster horizontal skill mismatches, such that someone's acquired skills do not match the skills needed in their current occupation. In line with previous mismatch literature, Chapter 3 shows that such horizontal skill mismatches are a multi-faceted phenomenon. First, whereas only about half of all individuals work in exactly the occupations that they learned formally, the degree of mismatch among the other half varies widely. Second, many individuals actually realize wage gains when becoming mismatched; this suggests that objectively identified mismatches are not bad per se. Based on these general findings and on the task-based approach, I hypothesize that horizontal skill mismatches are harmful to the wages of individuals who mostly hold skills substitutable by new technology, whereas they are not harmful in general. I account for this heterogeneity of mismatches in the empirical analysis of Chapter 3 by exploiting detailed occupational task data to measure the strength of mismatches and to focus on mismatches presumably caused by skill demand shifts due to new technology. The main result yields a wage penalty of roughly 12% for mismatched individuals with high shares of substitutable skills. Applying other methods to the same dataset suggests that objectively identified horizontal mismatches have zero wage implications on average, even after accounting for unobservable individual characteristics. From a policy perspective, it thus seems important to bear the heterogeneity of the mismatch phenomena in mind; otherwise, revealed average effects might mask negative effects on certain subgroups. In this spirit, I estimate mismatch wage penalties for different educational subgroups including VET diploma holders. And in this sense, all chapters of this thesis deal with the Swiss system of vocational education and training, a system that is recognized by many as one of the key contributors to the country's economic success. However, as this thesis shows, it is also a system that contains frictions, even contradictions at first sight, a system regularly challenged by pupils entering it and labor markets demanding its outcomes, and therefore a system that must remain agile. Thus, the recognition that the Swiss VET system receives from inside and outside the country must motivate constant reflection, adjustment, and amelioration, and should never tempt to rest on its laurels. I hope this thesis plays its modest role in fulfilling this purpose