Dong-Qing Yao

Pricing policies under direct vs. indirect channel competition and national vs. store brand competition

Abstract This paper analyzes channel pricing in multiple distribution channels under competition between a national brand (NB) and a store brand (SB), where an NB can be distributed both through a direct channel (e-channel) and an indirect channel (local stores) but an SB can be distributed only through an indirect channel. We first explore cross-brand and cross-channel pricing policies. Formulating the problem as a Nash pricing game, we reach two findings: (1) brand loyalty building is profitable for both an NB and an SB; and (2) marketing decisions are more restrictive for an NB channel than they are for the SB channel. We next assess supply chain coordination and reach two findings: (1) wholesale price change does not coordinate the supply chain and (2) an appropriate combination of markup and markdown prices can achieve both supply chain coordination and a win–win outcome for each channel.

Channel redistribution with direct selling

Abstract It seems nowadays that a company can be considered either a “pure-direct” such as Amazon.com and Dell Computers, or an “adopted-direct”, like Barnes and Noble for example. An adopted-direct company’s decision to directly sell “on-line” has become a fashionable choice. But the results of such choice differ drastically. Glorious success mixed with pathetic failure. One of the pending issues has been the channel redistribution strategy, as whether to entirely switch to direct sell or to maintain a combination of both. In this paper, we develop a dynamic channel diffusion model and analyze how the sales will redistribute between the two channels in a given time-variant marketplace. This paper provides two major contributions: First, we obtain the existence of a steady-state redistribution between the two channels and the necessary conditions for this existence; Second, we establish measures of industry-specific suitability for on-line business operations. In short, our results concur with the theory: IT changes the way of doing business, but does not change the business itself.

Price and quality decisions in dual-channel supply chains

Since the decision of non-price feature such as product quality draws a little attention in the literature of dual-channel supply chains, this paper investigates price and quality decisions in dual-channel supply chains, in which a single product is delivered through a retail channel, a direct channel, or a dual channel with both retail and direct channels. Considering the supply chains can be centralized or decentralized, we demonstrate that quality improvement can be realized when a new channel is introduced. Moreover, we employ two themes in terms of channel-adding Pareto zone to characterize the impacts of channel structures on supply-chain performance, including the whole systems profit (for the centralized system), each players profit (for the decentralized system), and consumer surplus. When price and quality decisions are considered, we find the supply chain performance could be improved due to a new channel augmented. Moreover, we show the effects of the quality sensitivity parameters of different channels on price and product quality, as well as profits and consumer surplus.

Forecast facilitated lot-for-lot ordering in the presence of autocorrelated demand

With consistent effort in setup reduction as encouraged by JIT principle, lot-for-lot ordering is gaining popularity in MRP applications. A lot-for-lot order is an immediate copy of the MPS (master production schedule) - direct reflection of demand forecasts. Since all levels of MRP plans are based on MPS, the accuracy of MRP is highly dependent of the accuracy of demand forecasting. In this paper, we are concerned about the impact of forecasting to the performance of a lot-for-lot MRP system when there is notable variability and autocorrelation in the underlying demand process (e.g., an AR(1) process). Specifically under a stationary AR(1) demand, we examine the performance of the MRP based on the most common EWMA forecast model, and then compare it with a minimum mean square error (MSE) forecast model. The notable findings of this study include: (1) MRP performance differs noticeably under the two different forecasting models. (2) The MSE-optimal forecasting performs no worse than the EWMA forecasting in all aspects of MRP applications.

The Dynamic Newsvendor Model with Correlated Demand

The classic newsvendor model was developed under the assumption that period-to-period demand is independent over time. In real-life applications, the notion of independent demand is often challenged. In this article, we examine the newsvendor model in the presence of correlated demands. Specifically under a stationary AR(1) demand, we study the performance of the traditional newsvendor implementation versus a dynamic forecast-based implementation. We demonstrate theoretically that implementing a minimum mean square error (MSE) forecast model will always have improved performance relative to the traditional implementation in terms of cost savings. In light of the widespread usage of all-purpose models like the moving-average method and exponential smoothing method, we compare the performance of these popular alternative forecasting methods against both the MSE-optimal implementation and the traditional newsvendor implementation. If only alternative forecasting methods are being considered, we find that under certain conditions it is best to ignore the correlation and opt out of forecasting and to simply implement the traditional newsvendor model.

Pre-positioning of relief inventories for non-profit organizations: a newsvendor approach

Developing an efficient policy to determine the inventory a non-profit organization (NPO) should stockpile to respond to potential disasters plays a vital role in humanitarian relief. Incorporating social donation and emergency spot purchasing, this paper develops a (generalized) two-stage delivery process model to characterize relief materials’ delivery after a disaster. We propose an analytical model that aims to minimize the total costs when all demands incurred by an unexpected disaster need to be fully satisfied. Moreover, we determine that the optimal solution uniquely exists and characterize the effects of key parameters. Last, this paper also develops a risk-sharing scheme, in which the NPO and the supplier jointly stockpile relief materials. Under some mild conditions, we show that implementing the scheme could increase the storage quantity and decrease the total costs simultaneously. Several numerical examples are employed to validate the model, as well as the value of the proposed risk-sharing scheme.

Drivers of Adoption and Continued Use of E-Procurement Systems: Empirical Evidence from China

ABSTRACT This article develops and empirically tests a research framework that models the role of technological, organizational, and environmental factors in organizational intention toward using e-procurement systems. The partial least square analysis of survey data from 211 firms in China demonstrates that technological factors including perceived efficiency benefits and perceived ease, organizational factors including business to business commerce expertise, information sharing culture, and top management support, and an environmental factor, business partner pressure, shape in different ways organizational intention to adopt and to continue with e-procurement. The findings of the study not only offer valuable insights for stimulating the diffusion of e-procurement systems but also provide important guidance to systems vendors in strategizing their marketing campaigns and focusing limited resources on relevant strategic components.

E-business system investment for fresh agricultural food industry in China

A fresh agricultural food online exchange system is gradually becoming an emerging e-business model in China. However, how and when to make an investment in this new business model is risky due to the unique characteristics of fresh agricultural food. In this paper, from a third party decision maker’s perspective, we propose an evolutionary discounted cash flow model to investigate the optimum time point for investment. Based on the assumptions of base demand, the derived e-demand occurring on the pendent e-business system can be characterized by non-stationary stochastic processes. Then our new model can further be innovatively analyzed by considering the dynamic scheme of the cash flow and its evolution. The analytical results suggest the optimal investment time point depends upon the consumers’ switch rate from the physical store to e-store and on the urbanization rate. A Monte Carlo simulation is further presented to compare the effects of multiple uncertainties embedded into the system. Our uncertainty analysis reveals that when government financial support fluctuates greatly, the optimal investment time could be either in the very beginning or in the end. This optimal time strategy also holds for the random demand factor after the coefficient variation of the demand reaches a certain threshold.

Characteristics of inventory variation under auto-correlated demand by a myopic ordering policy

In this paper, assuming the demand is auto-correlated time series process, we examine the inventory variation under a specific myopic ordering policy with two different forecasting techniques. Our main findings are: 1) inventory variations are usually non-stationary, which suggests inventory level can easily be out of control; 2) different forecasting ordering policy has different effects on the inventory variation. The main managerial insights obtained from the analysis are that inventory variation can be dramatic even if the bullwhip effect is well contained; therefore in order to minimise the total supply chain costs, companies need to balance both the inventory variation and order variation.

Transaction cost analysis of supply chain logistics services: firm-based versus port-focal

With the overwhelming findings that systemic risk dominates idiosyncratic risk in individual firms along a supply chain or in an industrial sector, and noting the fact that supply chain literature so far has been firm-based, it is critical to analyse inter-firm transactions and related risks which have largely been omitted from current supply chain research. To advance along this critical dimension, we develop a transaction cost frontier model that allows inter-firm transaction facilities in terms of a port-focal supply chain modelling framework. The key findings are as follows. (1) Environment heterogeneity is a characteristic transaction attribute, and logistics efficiency is critically dependent on both intra-firm asset specificity (Williamson, 2002) and inter-firm environment heterogeneity when ports are considered as transaction facilities. Port logistics demonstrates that horizontal integration (as opposed to vertical integration) becomes more cost effective as environment heterogeneity increases, given the same degree of asset specificity among individual ports. (2) An adaptive advantage (eg, transaction efficiency) is identified and characterized through the port-focal industrialization of supply chains, and is found to be an explanatory cause for the geographically concentrated horizontal specialization and differentiation, as increasingly observed in practice. Logistics industrialization will bring about the growth of port-focal urbanization.