Jing-Sheng Jeannette Song

Stock or Print? Impact of 3D Printing on Spare Parts Logistics

We present a general framework to study the design of spare parts logistics in the presence of 3D printing technology. We consider multiple parts facing stochastic demands, and adopt procure/manufacture-to-stock versus print-on-demand to highlight the main difference of production modes featured in traditional manufacturing and 3D printing. A multi-class priority queue with deterministic service times is employed to capture the intrinsic heterogeneity among spare parts and reflect the operational details of 3D printing. To minimize long-run average system cost, our model determines which parts to stock and which to print. We find that the optimal 3D printers utilization increases as the additional unit cost of printing declines and the printing speed improves. The rate of increase, however, decays, demonstrating the well-known diminishing returns effect. We also find the optimal utilization to increase in part variety and decrease in part criticality, suggesting the value of 3D technology in tolerating large part variety and the value of inventory for critical parts. By examining the percentage cost savings enabled by 3D printing, we find that, while the reduction in printing cost continuously adds to the value of 3D printing in a linear fashion, the impact of the improvement of printing speed exhibits S-shaped growth. We also derive various structural properties of the problem and devise an efficient algorithm to obtain near optimal solutions. Finally, our numerical study shows that the 3D printer is in general lightly used under realistic parameter settings but results in significant cost savings, suggesting complementarity between stock and print in cost minimization.

Contract Types and Supplier Incentives for Quality Improvement

When firms outsource production to suppliers, a key concern is how to control product quality and to motivate the supplier to invest in quality improvement. In practice, several kinds of quality management contracts are commonly used, such as subsidizing the supplier’s quality investment, setting a defect rate target, and a combination of both. This paper analyzes and compares the effectiveness of these approaches in a stylized two-echelon supply chain with deterministic market demand and imperfect batch production process. We show that the appropriateness of a contract form depends on the supplier’s initial quality level as well as the information structure about this level.

Payment Timing in Multiechelon Supply Chains: Cost Assessment, Incentives, and Coordination

Advanced information technologies are increasing the variety of payment triggers between supply chain stages. The cost assumptions made by standard multiechelon inventory models, however, do not have the flexibility to account for these rapid changes. We take one step towards closing this gap by focusing on common payment triggers used with wholesale prices. We introduce a notation system to explicitly connect physical and financial flows so that payment streams can be expressed as functions of standard physical inventory metrics. We then derive a new cost formulation that captures the financial inventory cost implications of such payment streams. These tools are powerful because they dramatically increase the usability and adaptability of existing multiechelon inventory models, under both traditional and more general payment terms. To illustrate, we apply these methods to derive insights on three supply chain topics in a two-echelon base stock model. First, we examine how wholesale prices affect competitive inventory policies and supply chain efficiency under standard payment terms – showing that the cost of decentralization is not only due to too little inventory at the retailer, but also to too much inventory at the supplier. Second, we explore consignment as a possible coordination mechanism – showing that full consignment causes the supplier to overly restrict the inventory at the retailer, but partial consignment can achieve coordination. Third, we study the impact of unequal costs of capital between supply chain members - providing insight into when extending lower capital cost rates to supply chain partners is beneficial.

Long Term Partnership for Achieving Efficient Capacity Allocation

We consider a manufacturer and a group of buyers who partner to share a scarce but expensive-to-build capacity over a finite horizon subject to fluctuating market conditions. The manufacturer must build the capacity before the buyers learn their actual needs. Each member has private history-dependent demand information and makes unverifiable investments. Because the value of the capacity to each partner is highly uncertain, it is challenging for the partnership to achieve supply chain efficiency while sustain under a dynamic environment. By introducing a novel breach remedy, we construct a long term membership agreement that enforces ex-post efficient capacity allocation and ex-ante investments. This agreement is also self-supporting and voluntary, allowing any or all members to dissolve the agreement at any time with provisions for compensation and division of the capacity.

Modeling Payment Timing in Multiechelon Inventory Systems with Applications to Supply Chain Coordination

Advanced information technologies are increasing the variety of payment triggers between supply chain stages. The cost assumptions made by standard multiechelon inventory models, however, do not have the flexibility to account for these rapid changes. We take one step towards closing this gap by focusing on common payment triggers used with wholesale prices. We introduce a notation system to explicitly connect physical and financial flows so that payment streams can be expressed as functions of standard physical inventory metrics. We then derive a new cost formulation that captures the financial inventory cost implications of such payment streams. These tools are powerful because they dramatically increase the usability and adaptability of existing multiechelon inventory models, under both traditional and more general payment terms. To illustrate, we apply these methods to derive insights on three supply chain topics in a two-echelon base stock model. First, we examine how wholesale prices affect competitive inventory policies and supply chain efficiency under standard payment terms – showing that the cost of decentralization is not only due to too little inventory at the retailer, but also to too much inventory at the supplier. Second, we explore consignment as a possible coordination mechanism – showing that full consignment causes the supplier to overly restrict the inventory at the retailer, but partial consignment can achieve coordination. Third, we study the impact of unequal costs of capital between supply chain members - providing insight into when extending lower capital cost rates to supply chain partners is beneficial.

Payment Terms and Wholesale Prices in Multiechelon Supply Chains: Cost Assessment, Incentives, and Coordination

Advanced information technologies are increasing the variety of payment triggers between supply chain stages. The cost assumptions made by standard multiechelon inventory models, however, do not have the flexibility to account for these rapid changes. We take one step towards closing this gap by focusing on common payment triggers used with wholesale prices. We introduce a notation system to explicitly connect physical and financial flows so that payment streams can be expressed as functions of standard physical inventory metrics. We then derive a new cost formulation that captures the financial inventory cost implications of such payment streams. These tools are powerful because they dramatically increase the usability and adaptability of existing multiechelon inventory models, under both traditional and more general payment terms. To illustrate, we apply these methods to derive insights on three supply chain topics in a two-echelon base stock model. First, we examine how wholesale prices affect competitive inventory policies and supply chain efficiency under standard payment terms – showing that the cost of decentralization is not only due to too little inventory at the retailer, but also to too much inventory at the supplier. Second, we explore consignment as a possible coordination mechanism – showing that full consignment causes the supplier to overly restrict the inventory at the retailer, but partial consignment can achieve coordination. Third, we study the impact of unequal costs of capital between supply chain members - providing insight into when extending lower capital cost rates to supply chain partners is beneficial.

Teaming Up for Sustained Performance: A Repeated-Game Model of Voluntary Horizontal Collaboration

This paper presents a model to characterize the dynamics of and rationale for voluntary horizontal collaborations commonly seen in global supply chains and organizations. Examples of such collaborations include supply clusters, supplier alliances, and teams of peers within organizations. The model consists of two key elements. One is a repeated game framework that captures the dynamics of the underlying environment, such as the long-term interactions between individual players who have limited capabilities and face uncertain demand. The second element is a peer help mechanism, which articulates the implicit short-term cost and long-term benefit of team production and generate synergies among the players. Our analysis shows that the emergence of horizontal collaborations depends on the difference between the individual players’ productivity levels, players’ patience, and the prevalence of high performers on the team. We also show that equilibrium team size is determined by the cost/technology structure of the collaboration, which varies depending on what kind of asset (e.g., inventory or capacity) is shared. We further extend the model to a principal-agent framework, in which the principal can benefit from forming teams of agents but cannot enforce or monitor whether peer help occurs. Finally, we characterize the optimal compensation and team structure for the principal to assign agents to teams.