Bid Price Control for Demand Fulfillment in a Make-to-Stock Production System

In this paper, we consider RM approaches for demand fulfillment in a make-to-stock (MTS) production system with known exogenous replenishments and stochastic demand from multiple customer classes. We propose three bid-price control models and evaluate their performance numerically

Strategic grading in the product acquisition process of a reverse supply chain

Most recommerce providers have moved to a quality-dependent process for the acquisition of used products. They acquire the products via websites at which product holders submit upfront quality statements and receive quality-dependent acquisition prices for their used devices. Motivated by this development of reverse logistics practice, the aim of this paper is to analyse the product assessment process of a recommerce provider in detail. To this end, we first propose a sequential bargaining model with complete information which captures the individual behaviour of the recommerce provider and the product holder. We determine the optimal strategies of the product holder and the recommerce provider in this game. We find that the resulting strategies lead to an efficient allocation, although the recommerce provider can absorb most of the bargaining potential due to his last mover advantage. In a second step, we relax the assumption of complete information and include uncertainty about the product holder's residual product value. We show the trade-off underlying the recommerce provider's optimal counteroffer decision and analyse the optimal strategy, using a logistic regression approach on a real-life data set of nearly 60,000 product submissions. The results reveal a significant improvement potential, compared to the currently applied strategy

Reverse Logistics Network Structures and Design

Logistics network design is commonly recognized as a strategic supply chain issue of prime importance. The location of production facilities, storage concepts, and transportation strategies are major determinants of supply chain performance. This chapter considers logistics network design for the particular case of closed-loop supply chains. We highlight key issues that companies are facing when deciding upon the logistics implementation of a product recovery initiative. In particular, we point out differences and analogies with logistics network design for traditional 'forward' supply chains. Moreover, we discuss the strategic fit between specific supply chain contexts and logistics network structures. Conclusions are supported by a quantitative analysis

Revenue management in an assemble-to-order production system

In this paper, we consider demand management decisions for an assemble-to-order production system in which both the availability of intermediate material and assembly capacity are limited. For each incoming order, the manufacturer must decide whether to accept it and what due date to quote for an accepted order. The actual assembly dates are still subject to change after these decisions, and a production schedule must be maintained to guarantee that the quoted due dates are met. Therefore, the decisions on accepting orders and quoting due dates must be made with incomplete knowledge of the actual resources used to fulfill the orders. To address these factors, we model this situation and develop a novel revenue management approach using bid prices. An extensive numerical study demonstrates the good performance of the proposed approach in comparison with benchmark algorithms and an ex-post optimal solution applied over a wide range of different supply and demand scenarios. Our results suggest that the consideration of assembly capacity constraints is more vital than the consideration of intermediate material constraints in our test cases

Substitution Effects in Supply Chains with Asymmetric Information Distribution and Upstream Competition

Inventory management in markets with substituting customers is extremely challenging, not only for a downstream wholesaler, but also for upstream manufacturers. Motivated by the structures in the agrochemical market, we analyze the optimal production and stocking quantities of a manufacturer and a wholesaler, respectively, in a two-stage supply chain with upstream competition and vertical information asymmetries. We characterize a monopolistic wholesaler's optimal stocking quantities and show that these quantities are not necessarily monotonic, neither in the available production quantities nor in the customers' substitution rates. We further derive the optimal production quantities of a monopolistic and a competitive manufacturer when they are incompletely informed about the wholesaler's stocking quantities. We find that the introduction of competition may lead to decreasing production quantities for some products. Furthermore, a product's end-of-season inventories at the manufacturer which arise due to information asymmetries may decrease even when initial production levels increase. Key words: customer substitution; supply chain; asymmetric information; competition; inventory managemen

Planning stability in a product recorvery syste

Recovery of used products is an issue of growing importance due to customer expectations and environmental regulation. As a consequence, companies need to adapt their material management taking into account inbound flows of used products. Corresponding inventory control models have been proposed in literature. In this paper we address the issue of planning stability in a product recovery context. To this end, we consider rolling horizon planning for a stock point facing stochastic demand and product returns. We analyze the impact of the return flow on planning stability and compare the system behaviour with a traditional production environment. We show that structural results derived for traditional inventory models remain valid in a product recovery context. Moreover we discuss counterintuitive effects resulting from interaction between planning stability and stock levels. Zusammenfassung. In den letzten Jahren besteht aufgrund gesetzlicher Bestimmungen und gestiegenem Umweltbewußtsein in der Bevölkerung zunehmend die Tendenz, daßUnternehmen ihre Produkte nach deren Gebrauch vom Kunden zurücknehmen. Die Produktionsplanung und -steuerung der Unternehmen muß diesen Produktrückflüssen angepaßt werden. In der Literatur sind für verschiedene kreislaufwirtschaftliche Probleme optimale Lagerhaltungspolitiken abgeleitet worden. Dieser Beitrag beschäftigt sich mit der Planungsstabilität in einem kreislaufwirt- schaftlichen Basismodell, wo alle zurückkommenden Produkte aufgearbeitet werden müssen. Insbesondere wird der Einflußder Produktrückflüsse auf die Stabilität untersucht und ein Vergleich mit der Stabilität eines traditionellen Lagerhaltungsmodells durchgeführt. Es wird aufgezeigt, daß beide Modelle im wesentlichen dieselben strukturellen Eigenschaften besitzen

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

Integrating Closed-loop Supply Chains and Spare Parts Management at IBM

Ever more companies are recognizing the benefits of closed-loop supply chains that integrate product returns into business operations. IBM has been among the pioneers seeking to unlock the value dormant in these resources. We report on a project exploiting product returns as a source of spare parts. Key decisions include the choice of recovery opportunities to use, the channel design, and the coordination of alternative supply sources. We developed an analytic inventory control model and a simulation model to address these issues. Our results show that procurement cost savings largely outweigh reverse logistics costs and that information management is key to an efficient solution. Our recommendations provide a basis for significantly expanding the usage of the novel parts supply source, which allows for cutting procurement costs

Applying Revenue Management to the Reverse Supply Chain

We study the disposition decision for product returns in a closed-loop supply chain. Motivated by the asset recovery process at IBM, we consider two disposition alternatives. Returns may be either refurbished for reselling or dismantled for spare parts. Reselling a refurbished unit typically yields higher unit margins. However, demand is uncertain. A common policy in many firms is to rank disposition alternatives by unit margins. We show that a revenue management approach to the disposition decision which explicitly incorporates demand uncertainty can increase profits significantly. We discuss analogies between the disposition problem and the classical airline revenue management problem. We then develop single period and multi-period stochastic optimization models for the disposition problem. Analyzing these models, we show that the optimal allocation balances expected marginal profits across the disposition alternatives. A detailed numerical study reveals that a revenue management approach to the disposition problem significantly outperforms the current practice of focusing exclusively on high-margin options, and we identify conditions under which this improvement is the highest. We also show that the value recovered from the returned products critically depends on the coordination between forward and reverse supply chain decisions