Mustafa Karakul

Analytical and managerial implications of integrating product substitutability in the joint pricing and procurement problem

This paper studies the analytical and managerial implications of product substitutability on the joint pricing and procurement decisions. We consider a single-period model with two products: an existing product and an improved new product that can substitute the demand for the existing product in case of a shortage. Demand for each product follows a general distribution with an expected value that is a linear function of the price of the new product. While the price of the existing product is determined by the market, it is necessary to determine the new products price and the procurement quantities of both products so as to maximize the profits. We analytically show that the expected profit function is unimodal and in the existence of substitution: the expected total profit is higher; the optimal price and the safety stock of the new product are higher; and the optimal safety stock of the existing product is less. Using these properties an efficient algorithm is developed. We also provide a numerical analysis to demonstrate that considering substitution in advance could increase the profitability by 58% and the new product price by 5% while decreasing the total procurement quantity by 15%.

Performance evaluation of a single-stage two-product manufacturing system operating under pull-type control

This paper presents a model to analyze a manufacturing system that is operating under pull-type control. A Markovian polling model with finite queues is devised to represent the manufacturing system and studied under three cyclic service policies: exhaustive, gated, and a type of limited policy. These polling models are solved by two different methods: an exact approach that requires the complete characterization of the system as a Markov chain and a decomposition approach that reduces the size of the Markov chain. A set of numerical experiments show that the decomposition approach is quite accurate in estimating system performance measures.

Modelling for policy assessment in the electricity supply sector of Pakistan

Purpose – The purpose of this paper is to provide a long‐term assessment of Pakistans electricity policy in the context of both environmental and resource constraints. To increase the sustainability of energy supply, the Government of Pakistan introduced a series of reforms in the electricity supply sector during 1990‐1995. In response to these policy incentives, most of the independent power producer offers included coal, oil, and/or gas‐based power plants. Considering that Pakistan produces only up to 40 percent of its oil demand domestically and thermal power generation causes CO2 emissions, there is a great need for an assessment of the existing electricity policy.Design/methodology/approach – Drawing on system dynamics methodology, this study presents and utilizes a dynamic simulation model that captures the dynamics of the sectors underlying the electricity supply system including investments, capital, production, resources, financial resources, and the environment.Findings – The key findings of th...

Joint pricing and procurement of substitutable products with random demands - A technical note

Single-period joint pricing and procurement of substitutable products entails one time procurement and pricing decisions for substitutable products that face price dependent stochastic demands. Recently, Karakul and Chan [Karakul, M., Chan, L., 2008. Analytical and managerial implications of integrating product substitutability in the joint pricing and procurement problem. European Journal of Operational Research 190, 179-204] considered this problem for two one-way substitutable products. Authors model the demands for each product in the well known additive form, where the mean demands are linear functions of the price of the high grade new product plus an additive stochastic noise term. By assuming that the noise term for the low grade existing product follows a general discrete distribution and the noise term for the high grade product follows a general continuous distribution, authors are able to show the unimodality of the expected profit function with respect to the procurement quantities and the price of the new product. In this paper, we extend this result to the case where the noise term in the demand of the low grade product follows a general continuous distribution as well.

Two-period dynamic versus fixed-ratio pricing in a capacity constrained duopoly

This paper analyzes the impact of dynamic and fixed-ratio pricing policies on firm profits and equilibrium prices under competition. Firms that have equal inventories of perfectly substitutable and perishable products compete for customer segments that demand the product at different times. In each period, customers first purchase from the low price firm and then from the high price firm up to their inventories, provided the prices are lower than the maximum they are willing to pay. The main conclusions of this paper are as follows: although dynamic pricing is a more sophisticated policy than fixed-ratio pricing, it may lead to decreased equilibrium profits; under both pricing policies, one firm assumes the role of a low-cost high-output firm while the other assumes the role of a high-cost low-output firm; and, the supply demand ratio has more impact on the outcome of the competition than the heterogeneity in consumer reservation prices.

An approximation method to analyse polling models of pull-type production systems

In this paper, a polling model with finite queues to analyse a production system that is operating under a pull-type control mechanism is studied. The polling model is analysed under three well-known service policies namely, exhaustive, gated and g-limited. These policies determine when and how machines switch from one part to another. These polling models can be solved by an exact approach that requires the complete characterisation of the system as a Markov chain. However, the state space increases dramatically with queue capacity and the number of parts manufactured. Hence an approximation approach that uses the regenerative property of the system is devised. Our numerical study shows that the approximation approach is not only very efficient in solving the problem but also very effective in finding accurate estimations of the system performance measures. [Received 13 December 2006, Revised 21 Febrauary 2007, Accepted 7 March 2007].