Dual Sourcing Under Random Supply Capacities
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Dual Sourcing Under Random Supply Capacities
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Author : Burcu Tan
language : en
Publisher:
Release Date : 2015
Dual Sourcing Under Random Supply Capacities written by Burcu Tan and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
Sourcing from multiple suppliers with different characteristics is common in practice for various reasons. This paper studies a dynamic procurement planning problem in which the firm can replenish inventory from a fast and a slow supplier, both with uncertain capacities. The optimal policy is characterized by two reorder points, one for each supplier. Whenever the pre-order inventory level is below the reorder point, a replenishment order is issued to the corresponding supplier. Interestingly, the reorder point for the slow supplier can be higher than that of the fast even if the former has a higher cost, lower reliability, and smaller capacity than the latter, suggesting the possibility of ordering exclusively from an inferior slow supplier in the short term. Moreover, the firm may allocate a larger portion of the long-term total order quantity to the slow supplier than to the fast, even if the former does not possess any cost or reliability advantage over the latter. Such phenomena, different from the observations made in previous studies, happen when the demand is uncertain and the supply is limited or unreliable. Our observations highlight the importance of incorporating both demand uncertainty and supplier characteristics (i.e., cost, lead time, capacity and uncertainty) in a unified framework when formulating supplier selection and order allocation strategies.
Dual Sourcing
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Author : Awi Federgruen
language : en
Publisher:
Release Date : 2020
Dual Sourcing written by Awi Federgruen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020 with categories.
We study a finite horizon, single product, periodic review inventory system with emph{two} supply sources and a salvage option. These supply sources are typically capacitated and capacity levels often need to be reserved or installed in advance of the operational planning horizon. The supply sources may thus be differentiated by their lead times, capacities and fixed and variable order costs. Salvage options allow for inventory reductions and incur fixed cost and variable revenues. We first analyze the tactical problem of determining an optimal procurement strategy under given capacity profiles at the two suppliers. We then address the strategic model in which optimal capacity profiles are obtained based on two-part capacity contracts. We characterize the structure of optimal procurement strategies when the lead times of the two suppliers differ by a single period and the lead time for salvage opportunities matches that of one of the suppliers. However, our structural results suggest effective heuristics and upper and lower bounds for general lead time combinations.
Dual Channel Sourcing And Selling Strategies In Operations Management
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Author : Chen Peng
language : en
Publisher:
Release Date : 2011
Dual Channel Sourcing And Selling Strategies In Operations Management written by Chen Peng and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with categories.
The ability of manufacturers and suppliers to adapt to changing market conditions is crucial in today's uncertain business environment. Having more than one sourcing or selling channel with complementary services can be an effective strategy for firms to enhance their operational flexibility. This dissertation thus investigates how firms can utilize multiple channels to efficiently procure their production and service capacity or distribute sales volumes to meet the needs of a dynamic market. It contains two major parts: First, in Chapters 2 and 3, we focus on the sourcing side and study how firms in capital-intensive industries can reduce their idle capacity while maintaining a high service level by purchasing production capacity from two supply sources. We construct a dual-mode equipment procurement model (DMEP), in which an equipment supplier provides two delivery modes to a firm: a base mode that is less expensive but slower and a flexible mode that is faster but more expensive. The combination of these two modes provides the firm the flexibility to mitigate demand risk at a potentially lower cost. Chapter 2 presents our theoretical approach and investigates a dynamic dual-source capacity expansion problem with consecutive leadtimes and demand backlogging. We demonstrate that the flexible orders follow a state-dependent base-stock policy; the base orders, however, follow only a partial-base-stock policy, which lacks structure and is difficult to track. Chapter 3 then tackles this problem from a practical perspective. Compromising optimality for applicability and efficiency, we construct a general DMEP heuristic that consists of three layers: a contract negotiation layer, in which the firm chooses the best combination of leadtime and price for each supply mode from the supply contract menu; a reservation layer, in which the firm reserves total equipment procurement quantities through the two supply modes by paying the supplier a reservation fee up front before the planning horizon starts; and an execution layer, in which the firm acquires the latest demand information in each period and orders equipment through both supply modes. We numerically quantify the value of the added flexibility for the firm and explore how the optimal reservation and execution decisions would change with respect to the key model parameters. Second, in Chapter 4, we instead study the selling side and discuss how a large commodity supplier should strategically allocate his limited production capacity between a fixed-price contract channel and a spot market to maximize his total sales income. We discuss two settings: one in which the equilibrium spot price follows an exogenous random distribution and one in which the equilibrium spot price is endogenously determined by the spot demand curve and the spot supply curve, both of which can be affected by the supplier's capacity allocation decision. In the former case, we find that the demand-price correlation and a risk-averse attitude are two reasons for the supplier to adopt a dual-channel strategy. The supplier should allocate more quantity to the spot channel if the contract channel demand and the spot price are more positively correlated, and he should allocate more to the contract channel if he is more risk-averse. In the latter setting, which further contains a contract trading stage and a spot trading stage, we show that a dual-channel policy is optimal in the first stage if the shifting effect of the supplier's spot allocation quantity on the default supply curve is stronger than the shifting effect of the unfulfilled contract channel demand on the default demand curve. Further, we demonstrate that it is not necessarily optimal to sell all leftover quantities in the spot market during the second stage. Using benchmark industry data, we quantify the average improvement in profit of adopting a dual-channel strategy versus using a single contract channel or a single spot channel through numerical analysis.
Strategies For Supply Chain Risk Management
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Author : Yi Li
language : en
Publisher: Taylor & Francis
Release Date : 2023-06-16
Strategies For Supply Chain Risk Management written by Yi Li and has been published by Taylor & Francis this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023-06-16 with Business & Economics categories.
Examining the negative consequences that arise from supply chain risks, this book systematically explores firms’ responses to these risks in different situations. In particular, it focuses on sourcing strategies of firms under supply chain risks and the different mitigation tools they use, such as supplier development and multisourcing. Supply chains have expanded extensively because many firms try to take advantage of outsourcing of their raw materials and critical components. Though firms can reap significant benefits due to the widespread use of outsourcing, they have to deal with increasing supply chain risks. In general, supply chain risks are various and may be originated from natural disasters, labor strikes, fires, and so on. These risk incidents can cause serious damage to firms’ profit performance. The analysis and insights from this book can be utilized by firms to alleviate the impact of supply chain risks in the sourcing process. It will also be of interest to researchers and students studying supply chain management.
On The Performance Of Tailored Base Surge Policies
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Author : Linwei Xin
language : en
Publisher:
Release Date : 2017
On The Performance Of Tailored Base Surge Policies written by Linwei Xin and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
Problem Definition: Many import items sold at Walmart.com have two suppliers: one is faster and has a random production capacity limit while the other is slower and has infinite capacity. The lead time difference of the two suppliers could be as large as 12 weeks. Walmart.com faces an important and challenging supply chain problem and must make routine inventory replenishment decisions.Academic/Practical Relevance: Dual-sourcing inventory models have been extensively studied in academia and dual-sourcing strategies have been widely implemented in practice. Recently, the so-called Tailored Base-Surge (TBS) policy has begun to receive more attention and demonstrated good performance in existing dual-sourcing models. TBS is intuitive and easy to manage: a constant-order is placed from the slow (regular) supplier every period and a base-stock policy is adapted from the fast (express) supplier. Methodology: This paper develops a new dual-sourcing inventory model incorporating large lead time difference as well as random capacity of the express supplier, and investigates the performance of TBS both theoretically and empirically by using Walmart's data.Results: We prove that a TBS policy is asymptotically optimal as the regular lead time grows, extending the previous asymptotic optimality of TBS policies in the dual-sourcing system without random capacities. We complement the theory and compare TBS with three well-known heuristics in a “simulated” real-world setting through model calibration by using historical sales data from Walmart.com. Our results demonstrate that TBS outperforms others as for minimizing the long-run average inventory cost. In particular, the inventory cost would be reduced by at least 33% if adapting a TBS policy. Our results also suggest that at an aggregate level, TBS could reduce Weeks of Supply by 2.7 weeks while increasing Met Demand by 3.3% compared with the single-sourcing policy using only the import supplier.Managerial Implications: Our results show that if the proposed dual-sourcing model and algorithm are adapted, Walmart's inventory system would be significantly improved especially for import items.
Operations Research Proceedings 2014
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Author : Marco Lübbecke
language : en
Publisher: Springer
Release Date : 2016-02-20
Operations Research Proceedings 2014 written by Marco Lübbecke and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-02-20 with Business & Economics categories.
This book contains a selection of refereed papers presented at the "International Conference on Operations Research (OR 2014)", which took place at RWTH Aachen University, Germany, September 2-5, 2014. More than 800 scientists and students from 47 countries attended OR 2014 and presented more than 500 papers in parallel topical streams, as well as special award sessions. The theme of the conference and its proceedings is "Business Analytics and Optimization".
Global Dual Sourcing
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Author : Gad Allon
language : en
Publisher:
Release Date : 2013
Global Dual Sourcing written by Gad Allon and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
When designing a sourcing strategy in practice, a key task is to determine the average order rates placed to each source because that affects costs and supplier management. We consider a firm that has access to a responsive near-shore source (e.g., Mexico) and a low-cost offshore source (e.g., China). The firm must determine an inventory sourcing policy to satisfy random demand over time. Unfortunately, the optimal policy is too complex to allow a direct answer to our key question. Therefore, we analyze a tailored base-surge (TBS) sourcing policy that is simple, used in practice, and captures the classic trade-off between cost and responsiveness. The TBS policy combines push and pull controls by replenishing at a constant rate from the offshore source and producing at the nearshore plant only when inventory is below a target. The constant base allocation allows the offshore facility to focus on cost efficiency, whereas the nearshore facility's quick response capability is utilized only dynamically to guarantee high service. The research goals are to (i) determine the allocation of random demand into base and surge capacity, (ii) estimate the corresponding working capital requirements, and (iii) identify and value the key drivers of dual sourcing. We present performance bounds on the optimal cost and prove that economic optimization brings the system into heavy traffic. We analyze the sourcing policy that is asymptotically optimal for high-volume systems and present a simple "square-root" formula that is insightful to answer our questions and sufficiently accurate for practice, as is demonstrated with a validation study.
Dual Sourcing Under Heavy Tailed Demand
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Author : Isik Bicer
language : en
Publisher:
Release Date : 2015
Dual Sourcing Under Heavy Tailed Demand written by Isik Bicer and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
We consider a single-period dual-sourcing problem in which a buyer purchases its products from two different suppliers and sells them to a market with uncertain demand. One supplier is cheaper but less responsive, whereas the other supplier is more responsive but more expensive. The buyer determines the order quantity from the low-cost supplier and the capacity level from the responsive supplier in such a way that maximizes its profit. We apply extreme-value theory to analyze the impact of tail heaviness of demand distribution on optimal dual-sourcing strategy. We numerically find that tail heaviness moderates the effect of increasing demand uncertainty on optimal order levels. We also show that dual sourcing allows companies to increase their fill rates cost-effectively under heavy-tailed demand if the capacity-reservation cost of the responsive supplier is relatively low.
Optimization Problems And Their Applications
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Author : Anton Eremeev
language : en
Publisher: Springer
Release Date : 2018-06-29
Optimization Problems And Their Applications written by Anton Eremeev and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-06-29 with Computers categories.
This book constitutes extended, revised and selected papers from the 7th International Conference on Optimization Problems and Their Applications, OPTA 2018, held in Omsk, Russia in July 2018. The 27 papers presented in this volume were carefully reviewed and selected from a total of 73 submissions. The papers are listed in thematic sections, namely location problems, scheduling and routing problems, optimization problems in data analysis, mathematical programming, game theory and economical applications, applied optimization problems and metaheuristics.
Creating Values With Operations And Analytics
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Author : Hau Lee
language : en
Publisher: Springer Nature
Release Date : 2022-10-21
Creating Values With Operations And Analytics written by Hau Lee and has been published by Springer Nature this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022-10-21 with Business & Economics categories.
This book showcases how the latest and most advanced types of analytical modeling and empirical analysis can help to create value in the global supply chain. Focusing on practical relevance, it shares valuable management insights and addresses key issues in operations management (OM), demonstrating how past research has led to various practices and impacts, while also exploring the aspirations of the latest research. It presents current research on various topics such as global supply chain design, service supply chains, product design, responsible supply chains, performance and incentives in operations, data analytics in health services, new business models in the digital age, and new digital technology advances such as blockchain. In addition, it presents practical case studies on the aforementioned topics. Beyond the value of its contents, the book is intended as a tribute to Professor Morris Cohen, who has been a major contributor to advancing the research frontier in operations management and a driving force in shaping the field. Given its scope, the book will appeal to a wide readership, from researchers and PhD students to practitioners and consultants.