Joint optimal ordering and weather hedging contract decisions: a newsvendor model.

Yeung Yun Sing Samson.Thesis (M.Phil.)--Chinese University of Hong Kong, 2005.Includes bibliographical references (leaves 64-67).Abstracts in English and Chinese.Chapter 1 --- Introduction --- p.1Chapter 2 --- Background --- p.5Chapter 2.1 --- Applicability of Weather Derivative in Hong Kong: The Recre- ation Industry --- p.7Chapter 2.2 --- Types of Weather Risk --- p.9Chapter 3 --- Literature Review --- p.12Chapter 4 --- Basic Model --- p.17Chapter 4.1 --- Notations --- p.18Chapter 4.2 --- Assumptions --- p.21Chapter 4.3 --- The Profit Model --- p.22Chapter 5 --- Fundamental Analysis --- p.25Chapter 5.1 --- Sales Profit Analysis --- p.25Chapter 5.2 --- Option Analysis --- p.27Chapter 5.3 --- Profit Function Reformulation --- p.30Chapter 6 --- Objectivel: Lexicographic Optimization --- p.35Chapter 6.1 --- Equivalence between Lexicographic Optimization and Expected Utility Maximization --- p.38Chapter 6.2 --- Minimizing the Conditional Profit Variance given Q* --- p.39Chapter 6.3 --- Numerical Examples --- p.42Chapter 6.3.1 --- Convexity of conditional profit variance --- p.42Chapter 6.3.2 --- Correlation between Q* & N* --- p.47Chapter 7 --- Objective2: Mean-Variance Optimization --- p.52Chapter 7.1 --- Numerical Examples --- p.59Chapter 8 --- Conclusion and Future Work --- p.61Bibliography --- p.64Chapter A --- Weather Option Pricing --- p.68Chapter B --- Infeasibility of Perfect Hedge --- p.7

Analysis of the Dynamical Behavior of Firms in a Three Layered Modular Assembly Model

This paper formulate an option model considers supplier's reaction as the profit sharing in module production, and analyses it by the agent theory. A dynamic environment in the model of the system of the production of modules of three layers is assumed, and the maker and the supplier are modeled by the technique of Genetic Programming (GP) as an agent who takes the action of selfoptimization. As result, the condition that the agent can exist continuously in the market is requested. In conclusion, violent competition and the selection of the similar agent are found even in the model of the option to consider the profit sharing and the reaction

SINGLE PERIOD INVENTORY MODEL WITH STOCHASTIC DEMAND AND PARTIAL BACKLOGGING

ABSTRACT In this present scenario of world economy both the factors like salvage and stock-out situations are equally important. Continuous sources of uncertainty (stochastic demand), has a different impact on optimal inventory settings and prevents optimal solutions from being found in closed form. In this paper an approximate closed-form solution is developed using a single stochastic period of demand. Assorted level of demand is viewed in form of a special class of inventory evolution known as finite inventory process. Here the Inventory process is reviewed in form of three cases. This paper involves the study of optimality of the expected cost using the SCBZ property. Shortage cost is kept in view, in order to meet the customer demand. Finally this paper aims to show the optimal solution for three cases of finite inventory model in which the demand is varied according to the SCBZ property. Appropriate Numerical illustrations provide a justification for its unique existence

SINGLE PERIOD INVENTORY MODEL WITH STOCHASTIC DEMAND AND PARTIAL BACKLOGGING

ABSTRACT In this present scenario of world economy both the factors like salvage and stock-out situations are equally important. Continuous sources of uncertainty (stochastic demand), has a different impact on optimal inventory settings and prevents optimal solutions from being found in closed form. In this paper an approximate closed-form solution is developed using a single stochastic period of demand. Assorted level of demand is viewed in form of a special class of inventory evolution known as finite inventory process. Here the Inventory process is reviewed in form of three cases. This paper involves the study of optimality of the expected cost using the SCBZ property. Shortage cost is kept in view, in order to meet the customer demand. Finally this paper aims to show the optimal solution for three cases of finite inventory model in which the demand is varied according to the SCBZ property. Appropriate Numerical illustrations provide a justification for its unique existence

Information and decentralization in inventory, supply chain, and transportation systems

Thesis (Ph. D.)--Massachusetts Institute of Technology, Sloan School of Management, Operations Research Center, 2006.Includes bibliographical references (p. 199-213).This thesis investigates the impact of lack of information and decentralization of decision-making on the performance of inventory, supply chain, and transportation systems. In the first part of the thesis, we study two extensions of a classic single-item, single-period inventory control problem: the "newsvendor problem." We first analyze the newsvendor problem when the demand distribution is only partially specified by some moments and shape parameters. We determine order quantities that are robust, in the sense that they minimize the newsvendor's maximum regret about not acting optimally, and we compute the maximum value of additional information. The minimax regret approach is scalable to solve large practical problems, such as those arising in network revenue management, since it combines an efficient solution procedure with very modest data requirements. We then analyze the newsvendor problem when the inventory decision-making is decentralized. In supply chains, inventory decisions often result from complex negotiations among supply partners and might therefore lead to a loss of efficiency (in terms of profit loss).(cont.) We quantify the loss of efficiency of decentralized supply chains that use price-only contracts under the following configurations: series, assembly, competitive procurement, and competitive distribution. In the second part of the thesis, we characterize the dynamic nature of traffic equilibria in a transportation network. Using the theory of kinematic waves, we derive an analytical model for traffic delays capturing the first-order traffic dynamics and the impact of shock waves. We then incorporate the travel-time model within a dynamic user equilibrium setting and illustrate how the model applies to solve a large network assignment problem.by Guillaume Roels.Ph.D

Use of transportation relays to improve private fleet management

Thesis (M. Eng. in Logistics)--Massachusetts Institute of Technology, Engineering Systems Division, 2009.Includes bibliographical references (leaf 53).We explore the use of transportation relays, a somewhat unconventional transportation operations concept, in terms of improving private fleet management. A transportation relay is a shipment that is divided into two legs. With transportation relays, there is more ways to route freight with a private fleet. We use a linear program to find private fleet tours with and without relays for a large retailer. We find that relays increase private fleet use by 17% and reduce total transportation cost by 6%. Inbound relays increase the utilization of private fleet on the inbound lanes while outbound relays shift the private fleet capacity between neighboring DCs. Together, inbound and outbound relays better utilize existing private fleet resources and can be used to justify an investment in a larger private fleet through the purchase of addition tractors and trailers.by John Tsu and Mayank Agarwal.M.Eng.in Logistic

Data-driven revenue management

Thesis (S.M.)--Massachusetts Institute of Technology, Computation for Design and Optimization Program, 2007.Includes bibliographical references (p. 125-127).In this thesis, we consider the classical newsvendor model and various important extensions. We do not assume that the demand distribution is known, rather the only information available is a set of independent samples drawn from the demand distribution. In particular, the variants of the model we consider are: the classical profit-maximization newsvendor model, the risk-averse newsvendor model and the price-setting newsvendor model. If the explicit demand distribution is known, then the exact solutions to these models can be found either analytically or numerically via simulation methods. However, in most real-life settings, the demand distribution is not available, and usually there is only historical demand data from past periods. Thus, data-driven approaches are appealing in solving these problems. In this thesis, we evaluate the theoretical and empirical performance of nonparametric and parametric approaches for solving the variants of the newsvendor model assuming partial information on the distribution. For the classical profit-maximization newsvendor model and the risk-averse newsvendor model we describe general non-parametric approaches that do not make any prior assumption on the true demand distribution. We extend and significantly improve previous theoretical bounds on the number of samples required to guarantee with high probability that the data-driven approach provides a near-optimal solution. By near-optimal we mean that the approximate solution performs arbitrarily close to the optimal solution that is computed with respect to the true demand distributions.(cont.) For the price-setting newsvendor problem, we analyze a previously proposed simulation-based approach for a linear-additive demand model, and again derive bounds on the number of samples required to ensure that the simulation-based approach provides a near-optimal solution. We also perform computational experiments to analyze the empirical performance of these data-driven approaches.by Joline Ann Villaranda Uichanco.S.M

Essays on supply chain contracting and tactical decisions for inter-generational product transitions

Thesis (Ph. D.)--Massachusetts Institute of Technology, Sloan School of Management, 2007.Includes bibliographical references ().In this dissertation, we explore problems in two areas of Supply Chain Management. The first relates to strategic supplier management. The second focuses on tactical decisions on inventory and pricing during inter-generational product transition. In many industries, manufacturing firms use multiple competing suppliers in their component or product sourcing strategy. Chapter 2 studies optimal history-dependent contracts with multiple suppliers in a dynamic, uncertain, imperfect-information environment. The results provide an optimal contract structure for the manufacture and optimal performance and effort paths for the suppliers. We compare incentives in the form of product margin and that of business volume. Our results suggest that a volume contract may increase the total profit for the supply chain, partly due to its ability to allocate higher volume to the supplier that is more likely to input high effort, and partly through relative performance evaluation. However, for two suppliers with large asymmetry, it is better to contract independently with each supplier using margin incentive, rather than forcing them into a volume race. Chapter 3 studies the inventory planning decisions in the context of a technology product transition, i.e., when a new generation product replaces an old one. High uncertainties in a new product introduction coupled with long lead-time often lead to extreme cases of demand and supply mismatches. When a company runs out of the old product, a customer may be offered the new product as a substitute. We show that the optimal substitution decision is a time-varying threshold policy and establish the optimal planning policy. Further, we determine the optimal delay in new product introduction, given the initial inventory of the old product.(cont.) In Chapter 4, we study the optimal pricing decisions during a product transition. We restrict the new product price to be constant and formulate the dynamic pricing problem for the old product. We derive a closed-form solution for the optimal price under non-homogeneous Poisson demands. In addition, we compare three heuristic pricing policies: fixed-price, two-price, and myopic rolling-horizon policies. The results suggest that changing price once during the transition (the two-price policy) improves the profit dramatically and is near optimal.by Hongmin Li.Ph.D