Jinfeng Yue

Coordination of cooperative advertising in a two-level supply chain when manufacturer offers discount☆

Abstract We studied the coordination of cooperative advertisement in a manufacturer–retailer supply chain when the manufacturer offers price deductions to customers. With a price sensitive market, the expected demand with cooperative advertising and price deduction is demonstrated. When the manufacturer is a leader, we obtained the optimal national brand name investment, local advertisement and associated manufacturer’s allowance with any given price deduction. When the manufacturer offers more price deduction to customers, the retailer will increase local advertisement if the manufacturer provides the same portion of the local advertising allowance. We obtained the necessary and sufficient condition for the price deduction to ensure an increase of manufacturer’s profit, and a search procedure for determining such an optimal price deduction is provided as well. When the manufacturer and retailer are partners, we obtained the optimal national brand name investment and local advertisement. For any given price deduction, the total profit for the supply chain with cooperative scheme is always higher than that with the non-cooperative scheme. When price elasticity of demand is larger than one, the resulting closed form optimal price deduction with partnership is also obtained. To increase profits for both parties in a supply chain, we recommend that coordination in local and national cooperative advertising with a partnership relationship between manufacturer and retailer is the best solution. The bargaining results show how to share the profit gain between the manufacturer and the retailer, and determine the associated pricing and advertising policies for both parties.

Job sequencing and due date assignment in a single machine shop with uncertain processing times

This paper considers due date assignment and sequencing for multiple jobs in a single machine shop. The processing time of each job is assumed to be uncertain and is characterized by a mean and a variance with no knowledge of the entire distribution. A heuristic procedure is developed to find job sequence and due date assignment to minimize a linear combination of three penalties: penalty on job earliness, penalty on job tardiness, and penalty associated with long due date assignment. Numerical experiments indicate that the performance of the procedure is stable and robust to job processing time distributions. In addition, the performance improves when the means and variances of job processing times are uncorrelated or negatively correlated or when the penalty of a long due date assignment is significant. � 2006 Elsevier B.V. All rights reserved.

Pricing and advertisement in a manufacturer–retailer supply chain

We use a game theoretical approach to study pricing and advertisement decisions in a manufacturer–retailer supply chain when price discounts are offered by both the manufacturer and retailer. When the manufacturer is the leader of the game, we obtained Stackelberg equilibrium with manufacturer’s local allowance, national brand name investment, manufacturer’s preferred price discount, retailer’s price discount, and local advertising expense. For the special case of two-stage equilibrium when the manufacturer’s price discount is exogenous, we found that the retailer is willing to increase local advertising expense if the manufacturer increases local advertising allowance and provides deeper price discount, or if the manufacturer decreases its brand name investment. When both the manufacturer and retailer have power, Nash equilibrium in a competition game is obtained. The comparison between the Nash equilibrium and Stackelberg equilibrium shows that the manufacturer always prefers Stackelberg equilibrium, but there is no definitive conclusion for the retailer. The bargaining power can be used to determine the profit sharing between the manufacturer and the retailer. Once the profit sharing is determined, we suggest a simple contract to help the manufacturer and retailer obtain their desired profit sharing.

Mean–range based distribution-free procedures to minimize “overage” and “underage” costs

Abstract We discuss several mean–range based distribution-free decision procedures to minimize several “overage” and “underage” cost functions. For a general cost function, we identify the most favorable distribution and the least favorable distribution associated with the random variable of interest and determine the upper and lower bounds for the cost function. For the quadratic cost function, we recommend the min–max distribution-free decision. For the linear cost function, we identify the range of potential optimal decisions and recommend a hybrid distribution-free decision that has several desirable properties. We provide several numerical examples to demonstrate the robustness of the proposed distribution-free decisions.

Generating ranking groups in the analytical hierarchy process

The paper introduces a convenient procedure of ranking N alternatives through direct comparisons in AHP. The alternatives are divided into groups in such a way that dominant relationship exists between the groups but not among the alternatives within each group. This method is suitable for situations where the strict ranking in a sequence for all alternatives is not reliable or not necessary. Two procedures are proposed to construct the AHP ranking groups. The proposed grouping procedures can be used in conjunction with the traditional approaches.

Sequence jobs and assign due dates with uncertain processing times and quadratic penalty functions

This paper considers due date assignment and sequencing for multiple jobs in a single machine shop. The processing time of each job is assumed to be uncertain and is characterized by a mean and a variance with no knowledge of the entire distribution. The objective is to minimize the combination of three penalties: penalty on job earliness, penalty on job tardiness, and penalty associated with long due date assignment. The earliness and tardiness penalties and the penalty associated with long due date assignment are all expressed quadratic functions. Heuristic procedures are developed for the objective function. The due dates and sequences obtained by these procedures depend not only on means but also variances of the job processing times. Our numerical examples indicate that the variance information of job processing times can be useful for sequencing and due date assignment decisions. In addition, the performance of the procedures proposed in this paper are robust and stable with respect to job processing time distributions.

Design of discrete Dutch auctions with consideration of time

Abstract As a departure from much of the existing literature that aims at maximizing the expected revenue from a single auction, this research work is concerned with the design of discrete Dutch auctions to achieve the optimal balance between the selling price of the object and the auction duration so that the auctioneers expected revenue per unit of time is as high as possible. The new objective is especially important in trading perishable products or services when multiple auctions are to be conducted by the auctioneer for different sellers during a limited period of time. Our findings indicate that the proposed discrete Dutch auction models generate higher average revenues per unit of time for the auctioneer than their counterparts without consideration of time. This is achieved by reducing the duration of each auction in exchange for more auctions to be held within the given time frame so that the small decrease in the revenues from the longer auctions is more than compensated for by the large increase in the total revenues from the shorter auctions. The numerical results show that the proposed discrete Dutch auction design becomes extremely useful when the number of bidders becomes large. It is also shown that complete knowledge about the number of bidders in the auction results in a higher auctioneers expected revenue per unit of time.

Supplier Selection in Make-to-Order Manufacturing

When make-to-order (MTO) manufacturers receive unpredictable custom orders, they face a common challenge: quick supplier selection of custom parts and components. This challenge becomes even more serious when the order’s customization level is high, the MTO’s committed delivery time is short, the desired service level is high, and the missing delivery time penalty is severe. This chapter considers an MTO manufacturer who produces a product consisting of several custom parts that cannot be pre-inventoried. To respond to the custom order quickly, the MTO manufacturer can follow the procedures in this chapter to allocate orders to each supplier for each custom part and calculate the associated replenishment cost as well as the probability of meeting the delivery date, using the suppliers’ jobs on hand, availability, process speed, and defective rate. For a given delivery time and service level, a replenishment cost frontier can be generated to provide a range of options to meet customer requirements. This innovative method can be further extended to the case when the delivery time is not fixed and the manufacturer needs to reduce its delivery time to win a customer bid.

COMMIT TIME DECISION FOR MEASURING DEMAND SIDE QUALITY COSTS WITH LIMITED DISTRIBUTION INFORMATION

Consider a single machine processing multiproducts situation when only the mean and standard deviation of processing time for each product are available. The bounds of optimal commit delivery time range are obtained. A decision of the robust commit delivery time is suggested. An extension to the situation with information of orders in queue is also discussed. Numerical examples show that the suggested decision performs well. The expected value of additional information, which measures the maximum amount a decision maker is willing to pay for knowledge of true distribution information, is small, and that further demonstrates the worthiness of the suggested robust decision.