Jishnu Hazra

Impact of supply base heterogeneity in electronic markets

Abstract Internet based marketplaces have enabled industrial buyers to locate suppliers from geographically diverse locations. This has resulted in increased variations in certain supplier parameters such as capacity and cost among the participating suppliers. However, the impact of this increased heterogeneity on the procurement practices are not well understood. In this paper we consider three supplier parameters that can affect the price the buyer pays and the number of suppliers that the buyer will select for award of contract. These attributes are capacity, production cost and demand for supplier’s capacity. We show how these parameters impact the price that a supplier quotes. We also show how the buyer will determine the optimum number of suppliers using a reverse auction mechanism when he does not have perfect knowledge of the suppliers’ parameters. Our model suggests that buyers need to adjust some of the input parameters while procuring capacity from a heterogeneous supply base. For instance, buyers need to pre-qualify more suppliers if the supply base has greater heterogeneity.

Performance Evaluation of Closed Tree-Structured Assembly Systems

Assembly systems are very common in manufacturing environments. In such systems, certain machines require more than one part type before they can start processing. Our paper presents a practical stochastic model for evaluating the performance of closed-loop assembly systems. This evaluation is difficult because of synchronization delays and the large state space required to capture the interaction of the flow of parts among the various subassemblies. We present an approximate, but computationally efficient, aggregation/disaggregation algorithm to compute the system throughput and mean queue lengths for both the matched and unmatched WIP inventory components. The aggregation computes the conditional system throughput as a function of the number of jobs in the system, whereas the mean queue lengths are obtained by disaggregation. Application of our algorithm reveals several salient operational insights, such as the increase in queue length towards the downstream machines or the concavity of the assembly sys...

Analyzing closed Kanban-controlled assembly systems by iterative aggregation-disaggregation

Many companies use successful WIP limiting strategies such as CONWIP, kanban or drum-buffer-rope to control parts flows in complex production systems. This paper analyzes assembly systems with a tree structure, random processing times and a constant WIP control system. A heuristic version of the exact aggregation-disaggregation theory for finite Markov chains is developed here for performance evaluation of these closed Kanban-controlled assembly systems. It computes accurate estimates of the plant through-put but not of mean queue length, a common phenomenon in single-node decomposition of queuing networks. Because the approximation is theory-based, it provides a framework for further model development, with some possible extensions described in the paper. The approximation has the novel feature of doing simultaneous multiple partitions of the state space in such a way that the associated aggregate transition rates are mutually consistent. The methodology is a novel approach towards extending aggregation ideas to fork-and-join queuing networks, and it provides several useful operational and analytical insights.

Sourcing under incomplete information and negative capacity-cost correlation

We study a sourcing problem where a buyer reserves capacity from a set of suppliers. The suppliers have finite capacity and their unit production cost is a decreasing function of their capacity, implying scale economies. The capacity of each supplier and therefore the cost is his private information. The buyer and other suppliers only know the probability distribution of the supplier’s capacity. The buyer’s demand is random and she has to decide how much capacity to reserve in advance from a subset of suppliers and how much to source from marketplace. In this study we determine the buyer’s optimum reservation quantity and the size of the supply base. We find the presence of such capacity cost correlation leads to supply base reduction.

Services outsourcing under asymmetric cost information

In this paper, we investigate the impact of cost heterogeneity on the optimal sourcing strategy of a client firm that outsources her service requirements to a set of outside vendors/service providers. We analyze a typical situation involving service providers, who differ from one another with respect to the marginal cost and characterize the firm’s optimal size of vendor network. In our model, the client firm does not have complete information about the vendors’ cost structure.

A procurement model for electronic markets

Electronic markets provide an alternative channel for industrial procurement. However, there are alternative viewpoints on the impact of electronic market on the procurement practice of firms. While some argue that the number of suppliers selected for award of contract could increase, several others predict that the number of suppliers will decrease. We investigate this issue by modelling the procurement process in an electronic market. We explicitly model the coordination costs of dealing with selected suppliers in an electronic market. We analyse alternative coordination cost functions and develop solutions for the procurement policy that managers should adopt. Our results show that inclusion of coordination costs in the analysis is significant in the decision-making framework. We further show that managers do not gain much by prequalifying a large pool of suppliers to participate in the procurement process. Furthermore, we also found that variations in supplier capacities do not significantly affect the optimum number of suppliers when there are costs of coordination.

Stocking and Quality Decisions for Deteriorating Perishable Products Under Competition

In this study, we address the joint inventory and quality management in a Cournot duopoly, for a seasonally produced, perishable product whose quality deteriorates over time. The sales of the product occur over two periods, namely the season (first period) and the off-season (second period). Apart from the stocking quantities for the two periods, firms must decide the quality levels of the units to stock for the second selling period. Firms incur a cost to maintain particular quality levels. The equilibrium policies of the firms are characterized, and we discuss the impact of the firms’ quality costs on their inventory and quality decisions. We identify the conditions of the quality costs when competition ceases to exist in the second period, and analyse the impact of the quality costs on inter-temporal price fluctuations and product availability. Using the unconstrained equilibrium policy, we frame the firms’ inventory disposal policies when production yields are exogenous.

Responsible sourcing by improving workplace safety through buyer–supplier collaboration

Abstract In this paper, we study a problem where a buyer and a supplier collaborate to improve safety at the supplier’s facility. We analyze and compare three policies; for the first policy, the buyer and the supplier jointly collaborate to improve safety at the supplier’s manufacturing facility (this policy is known as Accord in the industry). For the second policy, the buyer supports the supplier by providing external funding (this policy is named Alliance). The third policy is the Base policy, which is used as a benchmark. Under Base policy, the buyer does not provide any support to the supplier on the safety front. Using analytical frameworks, we determine and characterize optimal policies from buyer’s, supplier’s and system safety perspectives. We find that a low capability supplier prefers Accord when the buyer’s capability is high and Alliance, otherwise. However, from safety perspective, for low capability supplier, Alliance should never be preferred.

Capacity investments and technology decisions under regulatory uncertainty

Understanding the capacity investment and technology decisions is vital for a firm particularly due to the fact that not meeting regulatory restrictions or insufficient investments could hurt the firm in the long run. Our aim in this paper is to study the investment decisions of companies considering potential risks of regulatory uncertainties that could alter previous investment decisions. We consider a firm facing random demand and uncertainties in the design regulatory standards. We find the firms capacity investments and technology selection decisions to mitigate potential risks of regulatory uncertainties and demand uncertainties.

In-house capacity investment and outsourcing under competition

We analyze a two buyer-one supplier setting. The buyers first simultaneously invest in in-house capacity with the knowledge of the demand distribution only. The demand is then realized after the investments are made. If the demand exceeds the invested capacity then, the balance requirement is sourced by the buyers from a common supplier. The supplier has the option to sell its capacity to an alternate market (where demand is random) and to these two buyers. We determine the equilibrium capacity investments by the two buyers in the presence of a supplier who has an alternate market.