Tieming Liu

Sales effort free riding and coordination with price match and channel rebate

This paper studies sales effort coordination for a supply chain with one manufacturer and two retail channels, where an online retailer offers a lower price and free-rides a brick-and-mortar retailer’s sales effort. The free riding effect reduces brick-and-mortar retailer’s desired effort level, and thus hurts the manufacturer’s profit and the overall supply chain performance. To achieve sales effort coordination, we designed a contract with price match and selective compensation rebate. We also examined other contracts, including the target rebate contract and the wholesale price discount contract, both with price match. The numerical analysis shows that the selective rebate outperforms other contracts in coordinating the brick-and-mortar retailer’s sales effort and improving supply chain efficiency.

Policies utilizing tactical inventory for service-differentiated customers

We consider a manufacturer serving two customer classes where one wants the item immediately and the second receives a discount to accept a delay. We show that an (S,R,B) base-stock policy is optimal under differentiation and non-differentiation where S, R, and B are the order-up-to, reserve-up-to, and backlog-up-to amounts.

Optimal production and inventory policies of priority and price-differentiated customers

Many firms are exploring production and supply chain strategies when customers may be segmented into different classes based on service level or priority. Such segmentation can result in a more efficient production system as well as a better match between supply and demand. In this research, we analyze a system with customer classes 1 and 2, where customer class 1 has a higher priority of fulfillment than customer class 2 in the same period. We develop an optimal production and inventory strategy that rations current and future limited capacity between customer classes 1 and 2, through reserving inventory for the future and accepting orders now for future delivery when demand and production are general stochastic functions. We show that a modified order-up-to policy (S*, R i*, B i*) is optimal in each period. S* is the targeted inventory level after production at the beginning of the period; R 1* represents the optimal inventory to be protected from being sold to both classes, and R 2* is the additional amount of inventory to protect from class 2. B 2* is the optimal amount of future capacity to make available to both classes through backlogging, and B 1* is the additional backlogging amount for class 1. Computational analysis shows that the differentiation strategy can result in a significant profit improvement over a traditional inventory policy.

Economic lot sizing problem with inventory bounds

Abstract This paper studies a economic lot sizing (ELS) problem with both upper and lower inventory bounds. Bounded ELS models address inventory control problems with time-varying inventory capacity and safety stock constraints. An O( n 2 ) algorithm is found by using net cumulative demand (NCD) to measure the amount of replenishment requested to fulfill the cumulative demand till the end of the planning horizon. An O( n ) algorithm is found for the special case, the bounded ELS problem with non-increasing marginal production cost.

Revenue management model for on-demand IT services

This paper presents a model for applying revenue management to on-demand IT services. The multinomial logit model is used to describe customer choice over multiple classes with different service-level agreements (SLAs). A nonlinear programming model is provided to determine the optimal price or service level for each class. Through a numerical analysis, we examine the impacts of system capacity and customer waiting incentives on the service providers profit and pricing strategies.

Stochastic lot-sizing problem with inventory-bounds and constant order-capacities

In this paper, we study the stochastic version of lot-sizing problems with inventory bounds and order capacities. Customer demands, inventory bounds, and costs are subject to uncertainty and dependent with each other throughout the finite planning horizon. Two models in stochastic programming are developed: the first one has inventory-bound constraints, and the second one has both inventory-bound and order-capacity constraints. We explore structural properties of the two models and develop and dynamic programming algorithms for them, respectively. Our model also generalizes the deterministic lot-sizing problem with inventory bounds. For some cases, when applied to the deterministic versions, our algorithms outperform existing deterministic algorithms.

Job scheduling to minimize the weighted waiting time variance of jobs

This study considers the job scheduling problem of minimizing the weighted waiting time variance (WWTV) of jobs. It is an extension of WTV minimization problems in which we schedule a batch of n jobs, for servicing on a single resource, in such a way that the variance of their waiting times is minimized. WWTV minimization finds its applications for job scheduling in manufacturing systems with earliness and tardiness (E/T) penalties, in computer and networks systems for the stabilized QoS, and in other fields where it is desirable to minimize WWTV of jobs with different weights for priorities. We formulate a WWTV problem as an integer programming problem, prove the V-shape property for agreeably weighted WWTV problems and the nondelay property for general WWTV problems, and discover the strong V-Shape tendency of the optimal job sequences for this problem. Two job scheduling algorithms, Weighted Verified Spiral (WVS) and Weighted Simplified Spiral (WSS), are developed for the WWTV problems. Numerical testing shows that WVS and WSS significantly outperform existing WWTV algorithms.

An Analysis of Logistic Costs to Determine Optimal Size of a Biofuel Refinery

Abstract: Transportation cost is an important factor to determine the optimal size of a biofuel refinery. In this article, we analyze the impact of logistic costs on the optimal size of a biofuel refinery by analyzing the trade-off between the switchgrass transportation cost and the economic scale of cellulosic ethanol production. To calculate the transportation cost, grids are used to calculate the variable distance from the fields to the refinery, and both fixed and variable transportation costs are considered. We examine the transportation cost with both round and square bales, and various yields and bulk densities. The results help a decision maker to determine critical factors that influence transportation costs of switchgrass. We also investigate the effect of refinery capacity increase on the transportation cost. The results can provide valuable insight into the economic scale of cellulosic ethanol production.

Quality coordination with extended warranty for store-brand products

In the past two decades, many store-brand products have been introduced by their retailers as having low-cost alternatives to existing brands. However, many store-brand products are perceived with lower quality because their manufacturers do not own the brands. In this paper, we investigate using extended warranties to coordinate the quality decisions of store-brand products. We investigate three extended warranty contracts for the amount of revenue transferred from the retailer to the manufacturer: fixed fee, proportional sharing, and manufacturer direct. Under the fixed fee structure, the transferred amount is pre-negotiated, fixed, and independent of the price of the extended warranty; under the proportional sharing structure, the transferred amount is proportional to the price of the extended warranty; under the manufacturer-direct structure, the retailer let the manufacturer decide the price and collect all the revenue of the extended warranty. Our analytical results show that all three contracts provide incentives for the manufacturer to improve the product quality. In the numerical analysis, we compare the performance of the three extended warranty contracts with the baseline case, where no extended warranty is offered. It shows that the manufacturer-direct contract achieves the highest quality improvement and the highest profit among the three contracts.

A note on “The economic lot sizing problem with inventory bounds”

In a recent paper, Liu (2008) considers the lot-sizing problem with lower and upper bounds on the inventory levels. He proposes an O(n^2) algorithm for the general problem, and an O(n) algorithm for the special case with non-speculative motives. We show that neither of the algorithms provides an optimal solution in general. Furthermore, we propose a fix for the former algorithm that maintains the O(n^2) complexity.