Arda Yenipazarli

Managing new and remanufactured products to mitigate environmental damage under emissions regulation

Emissions of greenhouse gases are not as free as they used to be. Under stringent regulations, manufacturers increasingly find that their emissions have a steep monetary, environmental and social price. In manufacturing industry, remanufacturing has an important role to play with its inherent economic, environmental and social opportunities which warrant regulatory action. In this paper, we characterize the optimal emissions taxation policy in order for remanufacturing to deliver those benefits. In particular, using a leader-follower Stackelberg game model, we investigate the impact of emissions taxes on the optimal production and pricing decisions of a manufacturer who could remanufacture its own product. We characterize whether/under what conditions the manufacturer’s decision to remanufacture under emissions regulation reduces its environmental impact (as measured by total greenhouse emissions), whilst increasing its profits (a win-win situation). On the policy side, we delineate how emissions taxes can be instituted to realize the inherent economic, environmental and social benefits of remanufacturing (the triple win of remanufacturing). Two critical components of this analysis are the issue of demand cannibalization from the remanufactured product and the low-emission advantage of remanufacturing. We further investigate the impact of remanufacturing- and society-related factors on the balance among firm-level profits, environmental impact and social welfare, where the collection rate of end-of-use products and the cost to the environment turn out to be decisive in deriving the triple win benefits from remanufacturing. Last, we extend our analyses to an emissions trading setting where emissions are regulated using tradeable permits, and investigate the economic implications of remanufacturing under emissions trading vis-a-vis emissions taxation.

Managing Supply Chain Disruptions

Managing Supply Chain Disruptions categorizes and reviews the substantive research contributions relating to managing supply chain disruptions. With a primary emphasis on formulating directions for future research, the authors focus on significant research and practical findings. Managing Supply Chain Disruptions reviews the general area of supply chain disruptions and examines classifications of disruptions, which can be used to provide insights into the disruption management process. It reviews the literature in the emerging field of disruption risk management, which attempts to identify specific risks associated with supply chain disruptions. This is followed by a review of conceptual/empirical research with a focus on providing general insights into how one or more organizations have managed the risk associated with disruptions. Given that designing robust supply chain networks is a key feature of managing disruption risk, the authors examine the relevant research in this domain. A detailed analysis of prior research targeted at managing specific risks (e.g., product, supply, operations/process, and transportation risks) is presented, and finally, directions for future research are discussed.

To collaborate or not to collaborate: Prompting upstream eco-efficient innovation in a supply chain

Large retailers are a source of great stress for suppliers in supply chains: they want better environmental performance and ever-lower prices without sacrificing product quality. Retailers’ initiatives pressure suppliers to invest substantially upfront to reduce packaging and energy use. The potential savings in packaging materials, production and shipping costs that could offset suppliers’ upfront investments, however, are not going mainly toward suppliers’ bottom lines, since the retailers appear to share only the savings but not the upfront investment. Thus, retailers’ heralded sustainability initiatives are weighed down by the substantial costs to be borne by suppliers alone, and retailers’ efforts to improve the environmental performance of their supply chains do not materialize as predicted. In this paper, we consider a two-echelon supply chain where an upstream supplier sells through a downstream retailer. The supplier is accountable to invest effort in an eco-efficient innovation, which decreases her unit production cost while improving the per-unit environmental performance of her product and increases the value of the product to consumers (so enhancing market demand), and the retailer who embodies the channel power sets the product price and sells to consumers. First, we delve into the non-collaborative case where the retailer imposes a minimum requirement on the level of eco-efficient innovation effort to be invested by supplier. Second, we study the profit/cost implications of collaboration between two parties for upstream eco-efficient innovation by scrutinizing two types of contracts: a cost-sharing agreement wherein the retailer shares a fraction of the supplier’s upfront cost of investment in innovation; and a revenue-sharing agreement under which the retailer shares a fraction of his revenues generated by the supplier’s eco-efficient innovation effort. For each contract, we also contemplate the possibility of negotiation between the retailer and supplier which forms the basis of division of costs and revenues under a cost- and revenue-sharing contract, respectively.

Pricing, market coverage and capacity: Can green and brown products co-exist?

Environmental strains are causing consumers to trade up to greener alternatives and many brown products are losing market coverage to premium-priced green rivals. In order to tackle this threat, many companies currently offering only brown products are contemplating the launch of a green product to complement their product portfolio. This paper provides strategic insights into and tactical ramifications of expanding a brown product line with a new green product. Our analysis explicitly incorporates a segmented consumer market where individual consumers may value the same product differently, the economies of scale and the learning effects associated with new green products, and capacity constraints for the current production system. It is shown that a single pricing scheme for the new green product limits a firm’s ability to appropriate the value different customers will relinquish in a segmented market and/or to avoid cannibalization. A two-level pricing structure can diminish and even completely avoid the salience of cannibalization. However, when resources are scarce, a firm can never protect his products from the threat of cannibalization by just revising the pricing structure which can spell the end of his brown product’s presence in the market or preclude the firm from launching the green product. At this point, the degree of cannibalization is higher for the brown product when the green product offers a sufficiently differentiated proposition to green segment consumers.

The Multi-product Newsvendor Problem: Review, Extensions, and Directions for Future Research

In this paper, we review the contributions to date for the multi-product newsvendor problem (MPNP). Our focus is on the current literature concerning the mathematical models and the solution methods for the multi-item newsvendor problems with single or multiple constraints, as well as the effects of substitute and complementary products on the stocking decisions and expected profits. We present some extensions to the current work for a stylized setting assuming two products and conclude with directions for future research.

A Road Map to New Product Success: Warranty, Advertisement and Price

In today’s hyper-competitive marketplace, new product introduction is commonly viewed as a vehicle for profitably growing businesses, yet market success remains rare and new innovative products fail at stunning rates. Current corporate thinking identifies a number of potential reasons, one of which lies in the poor execution of marketing-mix strategies. In this paper, we analyze how best to structure the marketing strategy of a company to foster and leverage his innovative new product with a focus on three variables—namely warranty duration, advertising spending and selling price—and attempt to provide a theoretical explanation for factors that affect optimal trajectories of these variables over time. We also conduct a detailed numerical study in order to test which market- and product-related factors have the most influence on and best explain the company’s new product introduction strategy, and illustrate the associated profit impacts. Our analysis proposes a time-variant threshold on advertising spending that structures the company’s marketing strategy over time. Secondly, we point out that warranty duration and price collectively follow the pattern of the diffusion curve of the new product, but reach their maximum levels before the new product matures. We also provide guidance about the effect of such market- and product-related factors as referral power, failure rates and effectiveness of advertising spending on a company’s new product introduction strategy.

Green, Greener or Brown: Choosing the Right Color of the Product

There does not exist a one-size-fits-all green product strategy in green market, and formulating a strategy that aligns a company’s economic and environmental goals is no small feat. In this paper we provide insights into a firm’s green product strategy choice with a focus on two alternative strategies: Greening-Up and Greening-Out. In doing so, we incorporate two important characteristics of the customer market where there are substantial numbers of customers who are potentially receptive to a green appeal: (1) Customer market is divided into three distinct and mutually exclusive segments based on large-scale surveys and interviews conducted to measure both customers’ willingness-to-pay for products with environmental attribute(s) and their propensity to buy these products; and (2) We factor in the findings of the most recent market behavior studies that even the customers that demonstrate the least environmental responsibility of all the segments can buy green products for non-environmental reasons. The contributions and findings of our work are as follows. First, we characterize the market- and product-related factors a firm should act on for a successful execution of green product strategies. Second, on the basis of customer choice data available, we assess the strategic fit of distinct pricing options under each strategy choice with the objective(s) of a firm. Third, we explore the extent to which a green product strategy creates higher environmental benefits while providing economic payoffs to a firm. In contrast to prevailing view, we show that greening up an existing brown product is not necessarily better at reducing the environmental impact of a firm than designing a new green product. We observe that responsiveness of the least environmentally conscious customers to environmental attributes added into a brown product sets one of the two major constraints on the environmental performance of Greening-Up strategy. We also observe that there does not exist a strict dichotomy between having a better economic performance and achieving a higher environmental performance, and a firm can achieve both goals simultaneously, even if it means leaving out serving some of the customers targeted by the firm’s existing brown product.

A Note on Lateral Transshipment under Point-Process Driven Demand

Abstract We analyze lateral transshipment for items whose demand is driven by an arbitrary point process. We find conditions under which lateral transshipment stochastically lowers the cost of a system of demand centers. Our main structural result is that transshipment works best for slow-moving items, such as spare-parts, when the demands are driven by non-homogeneous or homogeneous Poisson processes. We also obtain general results that apply when demand is driven by an arbitrary point process.

A branch-and-bound algorithm for the concave cost supply problem

Effective supplier selection and allocation of order quantity among multiple suppliers are indispensable to the success of a manufacturing company. While companies have begun to turn into a comprehensive multi-criteria approach, most buyers still consider purchasing cost to be their primary concern in selecting their suppliers. In this paper, we consider the concave cost supply problem where a manufacturer seeks to select the suppliers and simultaneously procure the quantity of material/component required for production at the minimum total cost during a standard production period. We provide and validate an effective and efficient branch-and-bound algorithm that is finite and that finds the global optimal solution of the problem without any restrictions on the cost functions or on the set of input parameters used in the problem. Numerical experiments are conducted to evaluate the performance of the proposed algorithm.