The impact of information sharing, random yield, correlation, and lead times in closed loop supply chains

This is the author accepted manuscript. The final version is available from Elsevier via the DOI in this recordWe investigate the impact of advance notice of product returns on the performance of a decentralised closed loop supply chain. The market demands and the product returns are stochastic and are correlated with each other. The returned products are converted into "as-good-as-new" products and used, together with new products, to satisfy the market demand. The remanufacturing process takes time and is subject to a random yield. We investigate the benefit of the manufacturer obtaining advance notice of product returns from the remanufacturer. We demonstrate that lead times, random yields and the parameters describing the returns play a significant role in the benefit of the advance notice scheme. Our mathematical results offer insights into the benefits of lead time reduction and the adoption of information sharing schemes.Japan Society for the Promotion of Scienc

A Newsvendor Approach to Compliance and Production under Cap and Trade Emissions Regulation

Since the 1990s, governmental agencies have increasingly turned to market based cap and trade programs to control the emission of pollutants. Firms subject to cap and trade regulation are typically required to acquire emissions allowances via open auction markets. The cost to acquire allowances may impose a substantial financial burden on a firm. While emissions reduction efforts may eliminate some firm\u27s need to acquire additional allowances, there are still numerous firms that need to purchase additional allowances on the open market. This study presents a new forward buying heuristic, designed for those firms that need to purchase emissions allowances via auctions, which reduces the impact of emissions allowance acquisitions on the firms\u27 financial performance. The heuristic, designated as the Newsvendor Production Planning with Emissions Allowance Forward Buying (NPPAFB) method, applies a forward buying algorithm to determine the number of periods for which to forward buy allowances, the current production order up to level, and the current and future emissions allowance requirements (which serves as the order up to level for allowance purchases). Additionally, NPPAFB also authorizes unused emissions allowances to be sold when market conditions are favorable. Compared against three existing production planning and allowance procurement strategies, a simulation exercise finds that the NPPAFB method significantly reduces a firm\u27s emissions allowance expenditures. These results indicate that heuristic can be readily adopted by any firm that is required to procure emissions allowances via open markets in an effort to improve the firm\u27s profitability

Behavioral Implications of Demand Perception in Inventory Management

The newsvendor problem is one of the rudimentary problems of inventory management with significant practical consequences, thus receiving considerable attention in the behavioral operational research literature. In this chapter, we focus on how decision makers perceive demand uncertainty in the newsvendor setting and discuss how such perception patterns influence commonly observed phenomena in order decisions, such as the pull-to-center effect. Drawing from behavioral biases such as over precision, we propose that decision makers tend to perceive demand to be smaller than it actually is in high margin contexts, and this effect becomes more pronounced with increases in demand size. The opposite pattern is observed in low margin settings; decision makers perceive demand to be larger than the true demand, and this tendency is stronger at lower mean demand levels. Concurrently, decision makers tend to perceive demand to be less variable than it actually is, and this tendency propagates as the variability of demand increases in low margin contexts and decreases in high margin contexts. These perceptions, in turn, lead to more skewed decisions at both ends of the demand spectrum. We discuss how decision makers can be made aware of these biases and how decision processes can be re-designed to convert these unconscious competencies into capabilities to improve decision making

A note on the effectiveness of scheduled balanced ordering in a one-supplier two-retailer system with uniform end-customer demands

10.1016/j.ijpe.2013.07.004International Journal of Production Economics1461240-245IJPC

Using scheduled ordering to improve the performance of distribution supply chains

10.1287/mnsc.1100.1196Management Science5691615-1632MSCI

Simulation of scheduled ordering policies in distribution supply chains

10.1109/WSC.2007.4419825Proceedings - Winter Simulation Conference1961-1967WSCP

A simulation approach to estimate the value of information in maritime supply chains

With the rapid increase in global trade and introduction of new security measures, maritime supply chain costs have increased and so has the need for business intelligence in improving maritime shipping operations. We develop a seaport operations model that simulates the decision making process associated with scheduling and processing of ships with the objective of evaluating the value of Geographical Information System (GIS) information. We consider two scenarios: (1) A traditional model where there is no GIS information on future ship arrivals; and (2) An information-rich model in which the arrival time of the next ship is known. We propose look-ahead based heuristics for the resulting optimization problems, determine the value of information (VOI), and tabulate how VOI varies as a function of the various operational parameters. Adding such operational intelligence to shipping operations improves the performance by as much as 60% (and by 15% on average) and reduces the costs without expanding the physical footprint of the seaport