Introduction to distribution logistics

Coordination issue is investigated in a supply chain with competing agents. The supply chain consists of a distribution system in which a supplier provides a common product to N independent retailers. These retailers face their respective stochastic demand markets but compete with each other through price and service operation. The retail competition model and coordination model are established, and the interactive dynamics among retailers is characterized, especially the existence and uniqueness of Nash Equilibrium are demonstrated when considering linear demand model. Finally, channel coordination is addressed in the studied supply chain with wholesale contracts. It is shown that these contracts can achieve perfect coordination only when the demand models satisfy some very limiting conditions.

Inventory competition and allocation in a multi-channel distribution system

Designing a bio-fuel network considering links reliability and risk-pooling effect in bio-refineries

Inventory management is one of the key functions in any supply chain. Since inventory cost occupies a significant portion of supply chain cost, it is essential to employ a good inventory policy in order to reduce the supply chain cost while improving the service level. This paper presents a vendor managed inventory (VMI) policy with emergency orders for a supply chain with a single vendor and two independent retailers. A mathematical model is developed using the concept of demand rate, assuming Poisson demand for the retailers. The formulated model is used to help determine the optimal system base stock level, delivery quantities to retailers and the cycle length such that the total expected inventory cost of the system is minimised. Numerical experiments and sensitivity analysis are then conducted to examine the effect of model parameters on total inventory cost and optimal solution.

Inventory management is one of the key functions in any supply chain. Since inventory cost occupies a significant portion of supply chain cost, it is essential to employ a good inventory policy in order to reduce the supply chain cost while improving the service level. This paper presents a vendor managed inventory (VMI) policy with emergency orders for a supply chain with a single vendor and two independent retailers. A mathematical model is developed using the concept of demand rate, assuming Poisson demand for the retailers. The formulated model is used to help determine the optimal system base stock level, delivery quantities to retailers and the cycle length such that the total expected inventory cost of the system is minimised. Numerical experiments and sensitivity analysis are then conducted to examine the effect of model parameters on total inventory cost and optimal solution.

Pricing and replenishment policies in a supply chain with competing retailers under different retail behaviors

It is tempting to say that, for a very long time, supply chain management has been a central topic in the field of management science and operations management. In fact, however, it has evolved from the seminal work done in the 1960s on multiechelon inventory models to recent studies of various mechanisms for coordinating supply chain decisions. In this evolution, one sees a clear shift from studying centralized planning models, in which a central planner makes all the decisions to optimize a systemwide objective, to focusing on decentralized systems with independent decision makers. This is no trival change, for it is one step closer to many real life situations, it has brought about another layer of complexity, and it often requires the use of new analytical tools. The department of supply chain management was created to recognize, emphasize, and encourage this change, and it will continue to do so. Organizing supply chain activities is about determining who does what (in the case of managers, who decides what), who knows what, and the economic incentives motivating supply chain members. This suggests that the management of supply chains can be addressed along three dimensions: allocation of decision rights, information elicitation and sharing, and incentive alignment. This framework matches what we observe in practice: vendor-managed inventory is a supply chain partnership to reallocate stocking decision rights; the creation of corporate communication networks is an example of information sharing; and the myriad of contracts signed among supply chain partners are attempts to align incentives. Moreover, the above three dimensions are likely to characterize the research frontier in supply chain management for the years to come. The Department of Supply Chain Management welcomes papers that are motivated by real-world operations problems and contribute to the understanding of supply chain management issues. The contributions can be methodological, conceptual, empirical, application-oriented, etc. The department especially welcomes papers that present novel models that may open up new directions of research. Needless to say, all submitted manuscripts must follow the guidelines of Management Science, and they will be rigorously refereed according to the normal standards of the journal. Please send four copies of the paper to the departmental editor of supply chain management at the address printed above. The associate editors for the department are: Sven Axsater, Lund University Gerard P. Cachon, University of Pennsylvania Gary Eppen, University of Chicago Stephen C. Graves, MIT Albert Y. Ha, Yale University Martin A. Lariviere, Northwestern University Evan L. Porteus, Stanford University Ananth Raman, Harvard University Kaj Rosling, Lund University Jeannette Song, University of California, Irvine Sridhar Tayur, Carnegie Mellon University Seungjin Whang, Stanford University

This study considers a manufacturer with ambidextrous sustainable innovation capability selling products in environmentally conscious market through an independent retailer in a two‐period game setting. We design a two‐period game theoretic and dyadic supply chain (SC) model considering exploitative and exploratory nature of environmental innovations. We study five different contract types, namely, wholesale price contract, vertical Nash game structure, cost sharing contract, revenue sharing contract and two‐part tariff contract. We demonstrate the impact of market sensitivity towards sustainable innovation and cost parameters on optimal level of decision parameters. The equilibrium results reveal that a suitably designed two‐part tariff contract can be used to achieve coordination in a fragmented SC. The equilibrium results assist managers to optimise the SC based on the two‐period contract model. The results obtained in this study can help the decision‐makers to take decisions on investment in the ambidextrous sustainable innovation under different types of contract structures.

Purpose: We consider the long-term survival of the newsvendor's supply chain (SC). In this regard, the main contribution of this paper is to identify and analyze two risks that threaten it, both derived from the random nature of the demand, which is inherent in the definition of the newsvendor problem (NVP). These are the risk of a decrease in demand due to unsatisfied demands because of the lack of stock and the risk of bankruptcy of the vendor due to insufficient monetary inflows.Design/methodology/approach: We present a mathematical model of the newsvendor's supply chain with three components: the Producer (P), the Vendor (V) and the Consumers (C). The model takes into account the relation between the components of the SC, the income and operative costs of P and V and the initial funds of V. We solve the model considering several assumptions related with the cost, the initial funds and the demand of C. Findings: We identify and analyze two risks that threat the continuity of the newsvendor’s supply chain in the long term. The first comes from the decreasing in the demand derived from the low level of service that can result from optimizing the joint income of P and V without considering a level of service constraint, which is an essential characteristic of any system of inventory management and has deserved little attention in the literature on the NVP. In fact, an unacceptable low level of service is hardly compatible with the assumption that the law of the demand does not change throughout the time. The second risk is that of V’s bankruptcy due to insufficient monetary inflows, what can happen even if the expected value of V's daily net income is positive. Indicators are proposed to measure these risks and procedures to calculate them.Practical implications: First, in the design of the Supply Chain, under conditions similar to that of the NVP, the decision maker must compare the options of resort or not to V, considering the consequences on income and risk. Second, the objective of coordinating the SC, understood as the maximization of the joint income of P and V, has the limitation of not taking into account that the consumers, which are also part of the SC, can leave it when they deem that the service is unsatisfactory. Third, P must be aware, when setting the parameters of the SC, that its decisions determine those of V and their consequences; therefore, P must take into consideration the economic survival of V, in order to avoid disruptions in the SC and the negative consequences they imply for P itself.Originality/value: Our approach is different from the most usual, which is focused on the criteria and the optimization procedures of the vendor. Instead, we consider the whole SC, including one essential component of it, namely, the consumers.

Purpose: The purpose of this study is to compare the performance of two advanced supply chain coordination mechanisms, Vendor Managed Inventory (VMI) and Collaborative Planning Forecasting and Replenishment (CPFR), under a price-sensitive uncertain demand environment, and to make the optimal decisions on retail price and order quantity for both mechanisms. Design/ methodology/ approach: Analytical models are first applied to formulate a profit maximization problem; furthermore, by applying simulation optimization solution procedures, the optimal decisions and performance comparisons are accomplished. Findings: The results of the case study supported the widely held view that more advanced coordination mechanisms yield greater supply chain profit than less advanced ones. Information sharing does not only increase the supply chain profit, but also is required for the coordination mechanisms to achieve improved performance. Research limitations/implications: This study considers a single vendor and a single retailer in order to simplify the supply chain structure for modeling. Practical implications: Knowledge obtained from this study about the conditions appropriate for each specific coordination mechanism and the exact functions of coordination programs is critical to managerial decisions for industry practitioners who may apply the coordination mechanisms considered. Originality/value: This study includes the production cost in Economic Order Quantity (EOQ) equations and combines it with price-sensitive demand under stochastic settings while comparing VMI and CPFR supply chain mechanisms and maximizing the total profit. Although many studies have worked on information sharing within the supply chain, determining the performance measures when the demand is price-sensitive and stochastic was not reported by researchers in the past literature.

The sophisticated behaviour of the customers, availability of variety of products, stiff competition and product obsolescence results in limited selling period and uncertainty in demand for a product. In that context, the newsvendor models have found increasing applicability in supply chain management (SCM). This paper investigates a newsvendor model with alternative risk preference in which vendor is averse to stockouts in order to avoid dissatisfaction of customers, cost of emergency order and lost sales. We obtain unique optimal solution of the problem and study its various properties. Since newsvendor problem ignores the effect of other vendors in the supply chain, we study a supply chain system with risk neutral wholesaler selling its product to several vendors with stockout averse preferences competing for inventory. We establish the existence and uniqueness of a pure strategy Nash equilibrium. Then we obtain unique optimal solution and study its characteristics. Finally, our model is illustrated with the help of numerical example.

Honey is a key raw material in the traditional medicine industry, processed through a supply chain that involves various stakeholders, such as suppliers, producers, and distributors. However, the management of the honey supply chain faces several challenges, particularly related to waste, including overproduction, excess inventory of raw materials, and defective products. This study aims to develop a framework for reducing waste in the honey supply chain using a Seven Wastes approach to identify problems, conduct root cause analysis through a fishbone diagram, and map the roles and classifications of stakeholders in implementing solutions. The results indicate that waste is caused by various factors, and the roles of stakeholders are classified based on supply chain drivers. This classification includes the management of machine capacity and maintenance at facilities, the implementation of Economic Order Quantity (EOQ), Just-in-Time (JIT), safety stock systems, as well as improvements in raw material quality in inventory management and procurement, and information classification using a forecasting system based on historical data. The implementation of these solutions is expected to optimize supply chain management and reduce waste.

The research observed the Supply Chain (SC) of Ammonium nitrate (AN), a critical and high-value explosive material in coal mining operation, which faces disruptions due to fluctuations of global and domestic coal demand, impacting to AN demand volatility. The lengthy, complex, dependency on sole suppliers, and non-integrated business process, coupled with specific mining conditions, results in long procurement lead times, high inventory costs, and coal production halt. This research used Kepner-Tregoe Analysis (KTA), Business Process Engineering (BPE), Vendor Managed Inventory (VMI), and Economic Order Quantity (EOQ) methods to appraises the complex SC situation, assess the business processes, develop an effective and efficient inventory management model and quantify the cost analysis. The VMI design will streamline SC processes by segregating the responsibilities: vendor manages daily procurement and warehouse operations, while the company provides oversight. It also aims to minimize unpredictable delivery times, elimination of shortages through optimized vendor stock, price and fall pricing stability via long-term agreements, enhanced cash flow through a monthly invoice, usage-based reconciliation, and a significant reduction in ordering and inventory holding costs. Eventually, this research contributes the benefits to Company, vendor, and as references for SC experts to develop a strategic SC Management through VMI implementation.

Purpose: Provide a coordination strategy using multiple common replenishment epochs (MCRE) for a single-supplier multi-retailer supply chain. Design/methodology/approach: The demand of a product occurs only with a group of heterogeneous and independent retailers with constant rates, whereas all their order requests are fulfilled by the supplier. The supplier decides a set of MCREs with general price and extra bonus to entice the retailers to join any one of the MCREs, or to let them remain with their original order time epochs. A retailer is willing to participate in a CRE as long as the retailer’s cost increase is within its tolerance. This paper provide a mixed integer programming to determine the MCRE strategies in order to minimize the total costs of the supplier. Findings: The results illustrate that MCRE model provided in the paper can generate a better replenishment coordination scheme than single CRE models. Practical implications: Replenishment coordination is one of the most important mechanisms to improve the efficiency in supply chains, e.g., chain convenience stores in the modern retail industry. Originality/value: This is a follow-up research on Joint Economic Lot Size (JELS) models with a focus on multiple retailers with their replenishment coordination.

We study the design of extended warranties in a supply chain consisting of a manufacturer and an independent retailer. The manufacturer produces a single product and sells it exclusively through the retailer. The extended warranty can be offered either by the manufacturer or by the retailer. The party offering the extended warranty decides on the terms of the policy in its best interest and incurs the repair costs of product failures. We use game theoretic models to answer the following questions. Which scenario leads to a higher supply‐chain profit, the retailer offering the extended warranty or the manufacturer? How do the optimum price and extended warranty length vary under different scenarios? We find that, depending on the parameters, either party may provide better extended warranty policies and generate more system profit. We also compare these two decentralized models with a centralized system where a single party manufactures the product, sells it to the consumer, and offers the extended warranty. We also consider an extension of our basic model where either the manufacturer or the retailer resells the extended warranty policies of a third party (e.g., an independent insurance company), instead of offering its own policy.