Ismail Serdar Bakal

Market selection decisions for inventory models with price-sensitive demand

In the majority of classical inventory theory literature, demand arises from exogenous sources upon which the firm has little or no control. In many practical contexts, however, aggregate demand is comprised of individual demands from a number of distinct customers or markets. This introduces new dimensions to supply chain planning problems involving the selection of markets or customers to include in the demand portfolio. We present a nonlinear, combinatorial optimization model to address planning decisions in both deterministic and stochastic settings, where a firm constructs a demand portfolio from a set of potential markets having price-sensitive demands. We first consider a pricing strategy that dictates a single price throughout all markets and provide an efficient algorithm for maximizing total profit. We also analyze the model under a market-specific pricing policy and describe its optimal solution. An extensive computational study characterizes the effects of key system parameters on the optimal value of expected profit, and provides some interesting insights on how a given market’s characteristics can affect optimal pricing decisions in other markets.

Joint quantity flexibility for multiple products in a decentralized supply chain

In this study, we analyze a decentralized supply chain with a single retailer and a single manufacturer where the retailer sells multiple products in a single period. The products differ in terms of a limited number of features only. The retailer places initial orders based on preliminary demand forecasts at the beginning of the period and has an opportunity to modify its initial order after receiving perfect demand information. However, the final orders of the retailer are constrained by its initial orders. The manufacturer has two options for procurement. The first procurement option is regular delivery at the beginning of the period, after the initial orders of the retailer. The next one is expedited delivery, after the updated orders are received. In this setting, our objective is to characterize the optimal policies for the retailer and the manufacturer, and assess the benefits of flexibility.

Value of supplier’s capacity information in a two-echelon supply chain

In traditional supply chain models it is generally assumed that full information is available to all parties involved. Although this seems reasonable, there are cases where chain members are independent agents and possess different levels of information. In this study, we analyze a two-echelon, single supplier-multiple retailers supply chain in a single-period setting where the capacity of the supplier is limited. Embedding the lack of information about the capacity of the supplier in the model, we aim to analyze the reaction of the retailers, compare it with the full-information case, and assess the value of information and the effects of information asymmetry using game theoretic analysis. In our numerical studies, we conclude that the value of information is highly dependent on the capacity conditions and estimates of the retailers, and having information is not necessarily beneficial to the retailers.

Order timing strategies in a single-supplier, multi-retailer system

The timing of retailer order placement is an important factor in supply chain performance in systems with uncertain end-customer demands. Retailers often prefer short order lead times, which permits the resolution of demand uncertainty prior to order placement, and reduces the risks associated with excess inventory. Suppliers, in contrast, prefer long lead times, in order to match supply output with retailer demand. These conflicting preferences create tension between a supplier and retailers regarding order timing preferences. This paper considers order timing preferences within a strategic framework involving a supplier and one of its retailers in a multiple-retailer system. We identify and explore several mechanisms a supplier can use within this framework to induce early retailer order placement and improve expected cost performance.

Value of disruption information in an EOQ environment

We consider an infinite horizon, continuous review inventory model with deterministic stationary demand where supply is subject to disruption. The supply process alternates between two states randomly: one in which it functions normally (ON-period) and one in which it is disrupted (OFF-period). In this setting, we seek the value of disruption information which enables the buyer to place “disruption orders” at the beginning of OFF-periods. Utilizing renewal theory, we derive the total expected cost and characterize the optimal regular order-up-to level together with the order-up-to level for disruption orders. We also conduct an extensive numerical analysis and compare the results with the model with no opportunity of disruption orders. We observe that if the shortage cost is relatively high, and the disruption risk is significant (in terms of duration and/or frequency), placing a disruption order reduces the expected total cost significantly.

Analysis of order timing tradeoffs in multi-retailer supply systems

We analyse the implications of order timing decisions in multi-retailer supply systems in a single period, newsvendor setting. Specifically, we investigate a supply chain with multiple retailers and a single supplier where one of the retailers is considered a preferred or primary customer of the supplier. In the base model (delayed commitment), customers order after observing demand and the supplier rations its production quantity to retailers according to a generalised uniform allocation rule. In the early-commitment model, the primary retailer commits to an order quantity prior to the selling season and receives her order in full. We compare the expected supplier and retailer profits under each of these strategies and specify conditions under which a particular commitment scheme benefits the supplier, the primary retailer, and the entire system. Our findings indicate that the supplier prefers early commitment under mild conditions, whereas the primary retailers preference depends on the tradeoff between the supply risk and demand risk. We also compare our findings with a single-retailer system, and observe that both the supplier and the primary retailer benefit from the existence of additional customers under delayed-commitment in many contexts.

Value of information through options contract under disruption risk

We model the replenishment strategy of a dual-sourcing buyer under disruption risk.We examine the benefits of an options contract with a reliable supplier.We consider three levels of information regarding the timing of option-exercise.We analytically characterize settings where the buyer chooses to single-source.The value of a flexible supplier increases as supply/demand uncertainty increases. In this study, we consider the replenishment strategy of a buyer with two suppliers. Since its regular supplier is prone to disruptions, the buyer utilizes an options contract with a more expensive but perfectly reliable supply option. We introduce three models depending on the level of information available when the options from the reliable supplier are exercised: (i) Full information (both supply and demand information), (ii) partial information (only supply information), and (iii) no information. We derive the optimal replenishment strategy of the buyer in each of these models and characterize the conditions under which the reliable supplier is utilized. Through both analytical and numerical studies, we investigate the effectiveness of an options contract under different levels of information.

Two-Stage Versus Single-Stage Inventory Models with or without Repair Ability

In this study, we consider an inventory system for a single item, which is being used in the military operations. In the current system, there is a two-echelon inventory setting which consists of a single stock point, the central depot, in the upper echelon and several stock points, the bases, in the lower echelon. A continuous review base-stock policy is used by all facilities. The military headquarters responsible for inventory management identified improvement opportunities such as acquiring repair ability and changing the structure of the supply chain from a two-echelon model to a single echelon model. Considering these opportunities, we investigate four different alternative inventory systems, single-echelon and two echelon models with or without repair ability. Our objective is to determine if and under what conditions each alternative results in lower costs.