scholarly journals Centralized and Decentralized Warehouse Logistics Collaboration

2020 ◽  
Vol 22 (4) ◽  
pp. 812-831 ◽  
Author(s):  
Shiman Ding ◽  
Philip M. Kaminsky
Keyword(s):  
Lower Bound ◽  
Transportation Cost ◽  
Problem Definition ◽  
Cost Ratio ◽  
Computational Studies ◽  
Practical Relevance ◽  
Grocery Industry ◽  
Ordering Policy ◽  
Managerial Implications ◽  
The Cost

Problem definition: We bound the value of collaboration in a decentralized multisupplier multiretailer setting, where several suppliers ship to several retailers through a shared warehouse, and outbound trucks from the warehouse contain the products of multiple suppliers. Academic/practical relevance: In an emerging trend in the grocery industry, multiple suppliers and retailers share a warehouse to facilitate horizontal collaboration, lower transportation costs, and increase delivery frequencies. Thus far, these so-called mixing and consolidation centers are operated in a decentralized manner, with little effort to coordinate shipments from multiple suppliers with shipments to multiple retailers. Facilitating collaboration in this setting would be challenging (both technically and in terms of the level of trust that would be necessary), so it is useful to understand the potential gains of collaboration. Methodology: We extend the classic one-warehouse multiretailer analysis to incorporate multiple suppliers and per-truck outbound transportation cost from the warehouse and develop a cost lower bound on centralized operation as benchmark. We then analyze decentralized versions of the system, in which each retailer and each supplier maximizes his or her own utility in a variety of settings, and we analytically bound the ratio of the cost of decentralized to centralized operation to bound the loss resulting from decentralization. Results: We find analytical bounds on the performance of several decentralized policies. The best, a decentralized zero-inventory ordering policy, has a cost ratio when compared with a lower bound on the centralized policy of no more than 3/2. In computational studies, we find that costs of decentralized policies are even closer to those of centralized policies. Managerial implications: Easy-to-implement decentralized policies are efficient and effective in this setting, suggesting that centralization (and thus a potentially complex and expensive coordination effort) is unlikely to result in significant benefits.

Symbolic Awards in Buyer–Supplier Relations

2021 ◽  
Author(s):  
Ruth Beer ◽  
Hyun-Soo Ahn ◽  
Stephen Leider
Keyword(s):  
Laboratory Experiments ◽  
Problem Definition ◽  
Practical Relevance ◽  
Negative Effects ◽  
Bottom Line ◽  
Managerial Implications ◽  
The Cost ◽  
Behavioral Mechanisms ◽  
The Relationship ◽  
High Effort

Problem definition: Giving out a symbolic “supplier of the year” or “outstanding supplier” award can be beneficial for a buyer as it may incentivize a supplier to exert higher efforts. However, when a good supplier is scarce, the award announces which supplier is particularly good and may increase the cost of building and maintaining the relationship. This paper studies both positive and negative effects of a symbolic award and offers explanations on underlying behavioral mechanisms. Academic/practical relevance: We show that symbolic awards can effectively incentivize suppliers to provide high effort, improving a buyer’s bottom line. This is particularly relevant in cases in which certain aspects of a buyer–supplier relationship are not contractible and suppliers have discretion over the quality provided. The award format significantly influences the award’s effectiveness. Methodology: We develop a game-theoretical model that captures a supplier’s utility for the award in a competitive setting and test the predictions of the model with laboratory experiments. Results: Our experimental results confirm that private symbolic awards have motivating effects and lead to higher buyer profits. When the awards are public, this profit premium diminishes as buyers pay higher prices to get the good suppliers. When the buyer is given the option to make the award public or private, buyers prefer that awards are public over private, anticipating a negative supplier response to their choice of the private award format. Managerial implications: Expressing praise or gratitude for a supplier’s efforts can be highly beneficial for a buyer. However, when there is scarcity of good suppliers, buyers should expect increased competition and accompany the award with efforts to preserve the relationship. Finally, if buyers choose to offer a distinctive award format, private recognitions may be perceived as greedy or self-interested and backfire.

Negotiating Government-to-Government Food Importing Contracts: A Nash Bargaining Framework

2021 ◽  
Author(s):  
Liying Mu ◽  
Bin Hu ◽  
A. Amarender Reddy ◽  
Srinagesh Gavirneni
Keyword(s):  
Ad Hoc ◽  
Developing Nations ◽  
Problem Definition ◽  
Pool Size ◽  
Nash Bargaining ◽  
Practical Relevance ◽  
Negotiation Model ◽  
Multiple Sourcing ◽  
Managerial Implications ◽  
Better Than

Problem definition: Inspired by India’s challenges in importing pulses, we study the negotiation of government-to-government food importing contracts, with a focus on ad hoc and forward negotiations with multiple suppliers (henceforth referred to as multiple-sourcing negotiations). Academic/practical relevance: We are the first to comprehensively study ad hoc and forward multiple-sourcing negotiations for food importing. Such problems are widespread, especially in developing nations, and thus the research can be relevant to the wellbeing of large underprivileged populations. Methodology: We develop an analytical negotiation model in the Nash bargaining framework and adopt the Nash-in-Nash framework to analyze multiple-sourcing negotiations. Results: We find that while forward negotiations are not necessarily better than ad hoc negotiations for the buyer, it would be true with sufficiently many suppliers. When facing a supplier pool, we show that it may be optimal to mix forward and ad hoc suppliers. In general, fewer suppliers should be assigned as ad hoc as the pool size increases. We also find that adding a hybrid supplier (engaged in a forward negotiation with an ad hoc negotiation as the fallback option) may be better or worse than adding a forward supplier in the presence of other suppliers. Managerial implications: Our findings inform how a food importer should strategically utilize ad hoc and forward negotiations with its suppliers to improve the outcome. The work may help countries’ food importing policymaking and strategies and may improve the wellbeing of large underprivileged populations.

scholarly journals Understanding the Value of Fulfillment Flexibility in an Online Retailing Environment

2021 ◽  
Author(s):  
Levi DeValve ◽  
Yehua Wei ◽  
Di Wu ◽  
Rong Yuan
Keyword(s):  
Theoretical Analysis ◽  
Numerical Simulations ◽  
Problem Definition ◽  
Order Fulfillment ◽  
Distribution Centers ◽  
Online Retailing ◽  
New Class ◽  
Managerial Implications ◽  
The Cost ◽  
Improve Service Quality

Problem definition: Fulfillment flexibility, the ability of distribution centers (DCs) to fulfill demand originating from other DCs, can help e-retailers reduce lost sales and improve service quality. Because the cost of full flexibility is prohibitive, we seek to understand the value of partially flexible fulfillment networks under simple and effective fulfillment policies. Academic/practical relevance: We propose a general method for understanding the practical value of (partial) fulfillment flexibility using a data-driven model, theoretical analysis, and numerical simulations. Our method applies to settings with local fulfillment (i.e., order fulfillment from the originating DC) prioritization and possible customer abandonment, two features that are new to the fulfillment literature. We then apply this method for a large e-retailer. We also introduce a new class of spillover limit fulfillment policies with attractive theoretical and practical features. Methodology: Our analysis uses dynamic and stochastic optimization, applied probability, and numerical simulations. Results: We derive optimal fulfillment policies in stylized settings, as well as bounds on the performance under an optimal policy using theoretical analysis, to provide guidelines on which policies to test in numerical simulations. We then use simulations to estimate for our industrial partner that a proposed fulfillment network with additional flexibility equates to a profit improvement on the order of tens of millions of U.S. dollars. Managerial implications: We provide an approach for e-retailers to understand when fulfillment flexibility is most valuable. We find that fulfillment flexibility provides the most benefit for our collaborator when gross profits are high relative to fulfillment costs or centrally held inventory is low. Also, we identify the risks of myopic fulfillment with additional flexibility and demonstrate that an effective spillover limit policy mitigates these risks.

AI and Procurement

2021 ◽  
Author(s):  
Ruomeng Cui ◽  
Meng Li ◽  
Shichen Zhang
Keyword(s):  
Price Discrimination ◽  
Recommendation System ◽  
Wholesale Price ◽  
Problem Definition ◽  
Practical Relevance ◽  
Trading Company ◽  
Smart Control ◽  
Managerial Implications ◽  
The Impact ◽  
Price Quotes

Problem definition: In this research, we study how buyers’ use of artificial intelligence (AI) affects suppliers’ price quoting strategies. Specifically, we study the impact of automation—that is, the buyer uses a chatbot to automatically inquire about prices instead of asking in person—and the impact of smartness—that is, the buyer signals the use of a smart AI algorithm in selecting the supplier. Academic/practical relevance: In a world advancing toward AI, we explore how AI creates and delivers value in procurement. AI has two unique abilities: automation and smartness, which are associated with physical machines or software that enable us to operate more efficiently and effectively. Methodology: We collaborate with a trading company to run a field experiment on an online platform in which we compare suppliers’ wholesale price quotes across female, male, and chatbot buyer types under AI and no recommendation conditions. Results: We find that, when not equipped with a smart control, there is price discrimination against chatbot buyers who receive a higher wholesale price quote than human buyers. In fact, without smartness, automation alone receives the highest quoted wholesale price. However, signaling the use of a smart recommendation system can effectively reduce suppliers’ price quote for chatbot buyers. We also show that AI delivers the most value when buyers adopt automation and smartness simultaneously in procurement. Managerial implications: Our results imply that automation is not very valuable when implemented without smartness, which in turn suggests that building smartness is necessary before considering high levels of autonomy. Our study unlocks the optimal steps that buyers could adopt to develop AI in procurement processes.

When to Lock the Volatile Input Price? Procurement of Commodity Components Under Different Pricing Schemes

2021 ◽  
Author(s):  
Shi Chen ◽  
Junfei Lei ◽  
Kamran Moinzadeh
Keyword(s):  
Supply Chain ◽  
Problem Definition ◽  
Optimization Approach ◽  
Input Price ◽  
Standard Contract ◽  
Ordering Policy ◽  
Pricing Scheme ◽  
Market Driven ◽  
The Cost ◽  
Pricing Schemes

Problem definition: We study a two-stage supply chain, where the supplier procures a key component to manufacture a product and the buyer orders from the supplier to meet a price-sensitive demand. As the input price is volatile, the two parties enter into either a standard contract, where the buyer orders just before the supplier starts production, or a time-flexible contract, where the buyer can lock a wholesale price in advance. Moreover, we consider three selling-price schemes: Market Driven, Cost Plus, and Profit Max. Academic/practical relevance: This problem is motivated by real practices in the cloud industry. Our model and optimization approach can address similar problems in other industries as well. Methodology: We assume that the input price follows a geometric Brownian motion. To determine the optimal ordering time, we propose an optimization approach that is different from the classic approach by Dixit et al. ( 1994 ) and Li and Kouvelis ( 1999 ). Our approach leads to deeper analytical results and more transparent ordering policy. Through a numerical experimentation, we compare profitability of different parties under different contracts, pricing schemes, and market conditions. Results: The buyer’s ordering policy is determined by a threshold policy based on the current time and input price; the optimal threshold depends on not only the drift and volatility of the input price but also, their relative magnitude. The supplier’s optimal procurement time should be determined by analyzing a trade-off between the holding cost of storing the components and the future input-price movement. Managerial implications: Under the Profit-Max and the Cost-Plus pricing schemes, the time-flexible contract is a Pareto improvement compared with the standard contract, whereas under the Market-Driven pricing scheme, the supplier may be better off under the standard contract. Moreover, although the most favorable scenario for the buyer is under the Profit-Max pricing scheme, the most favorable scenario for the supplier oftentimes is under the Cost-Plus pricing scheme. Furthermore, this study provides valuable insights into impacts of various characteristics of the component market, such as the trend and volatility of the input price, on the expected profit of the supply chain and its split between the two parties.

scholarly journals ANALISIS USAHATANI LABU KUNING DI DESA SINGSINGON RAYA, KECAMATAN PASSI TIMUR, KABUPATEN BOLAANG-MONGONDOW

2017 ◽  
Vol 13 (2) ◽  
pp. 87
Author(s):  
Lina Tini Pendong ◽  
Oktavianus ., Porajouw ◽  
Lyndon R. J. Pangemanan
Keyword(s):  
Descriptive Analysis ◽  
Secondary Data ◽  
Transportation Cost ◽  
Labor Cost ◽  
Primary Data ◽  
Cost Ratio ◽  
Average Production ◽  
Point Analysis ◽  
Break Even Point ◽  
The Cost

This study aims to analyze the cost and income of pumpkin farming in Singsingon Raya Village, East Passi District. The study was conducted from January to February 2017. The data used were primary and secondary data. Primary data through interviews using questionnaires to 15 respondents and secondary data obtained from Singsingon Raya Village Office. This analysis uses descriptive analysis. The results showed that the cost used for the largest pumpkin laboratory is labor cost and transportation cost of 87.28 %. In the marketing of pumpkin, farmers get large enough revenue so that farmers earn substantial income. The results can be seen from the total average production cost of Rp 4,012,238.00 / Ha with average revenue of Rp 21,159,420.00 / Ha of farmers earning income of Rp 17,147,182.00 / Ha. Analysis of return cost ratio get value > 1 so that pumpkin profitable for farmers and break even point analysis results showed that pumpkin farming is at break even point.

Intertemporal Content Variation with Customer Learning

2021 ◽  
Author(s):  
Fernando Bernstein ◽  
Soudipta Chakraborty ◽  
Robert Swinney
Keyword(s):  
Lower Bound ◽  
Dynamic Pricing ◽  
Business Models ◽  
Optimal Allocation ◽  
Planning Horizon ◽  
Problem Definition ◽  
Allocation Policy ◽  
Content Variation ◽  
Managerial Implications ◽  
Over Time

Problem definition: We analyze a firm that sells repeatedly to a customer population over multiple periods. Although this setting has been studied extensively in the context of dynamic pricing—selling the same product in each period at a varying price—we consider intertemporal content variation, wherein the price is the same in every period, but the firm varies the content available over time. Customers learn their utility on purchasing and decide whether to purchase again in subsequent periods. The firm faces a budget for the total amount of content available during a finite planning horizon, and allocates content to maximize revenue. Academic/practical relevance: A number of new business models, including video streaming services and curated subscription boxes, face the situation we model. Our results show how such firms can use content variation to increase their revenues. Methodology: We employ an analytical model in which customers decide to purchase in multiple successive periods and a firm determines a content allocation policy to maximize revenue. Results: Using a lower bound approximation to the problem for a horizon of general length T, we show that, although the optimal allocation policy is not, in general, constant over time, it is monotone: content value increases over time if customer heterogeneity is low and decreases otherwise. We demonstrate that the optimal policy for this lower bound problem is either optimal or very close to optimal for the general T period problem. Furthermore, for the case of T = 2 periods, we show how two critical factors—the fraction of “new” versus “repeat” customers in the population and the size of the content budget—affect the optimal allocation policy and the importance of varying content value over time. Managerial implications: We show how firms that sell at a fixed price over multiple periods can vary content value over time to increase revenues.

Unraveling Behavioral Ordering: Relative Costs and the Bullwhip Effect

2021 ◽  
Author(s):  
Brent B. Moritz ◽  
Arunachalam Narayanan ◽  
Chris Parker
Keyword(s):  
Supply Chain ◽  
Information Sharing ◽  
Human Behavior ◽  
Bullwhip Effect ◽  
Problem Definition ◽  
Supply Chain Costs ◽  
Cost Impact ◽  
Managerial Implications ◽  
The Cost ◽  
The Impact

Problem definition: We study the bullwhip effect and analyze the impact of human behavior. We separate rational ordering in response to increasing incoming orders from irrational ordering. Academic/practical relevance: Prior research has shown that the bullwhip effect occurs in about two-thirds of firms and impacts profitability by 10%–30%. Most bullwhip mitigation efforts emphasize processes such as information sharing, collaboration, and coordination. Previous work has not been able to separate the impact of behavioral ordering from rational increases in order quantities. Methodology: Using data from a laboratory experiment, we estimate behavioral parameters from three ordering models. We use a simulation to evaluate the cost impact of bullwhip behavior on the supply chain and by echelon. Results: We find that cost increases are not equally shared. Human biases (behavioral ordering) at the retailer results in higher relative costs elsewhere in the supply chain, even as similar ordering by a wholesaler, distributor, or factory results in increased costs within that echelon. These results are consistent regardless of the behavioral models that we consider. The cognitive profile of the decision maker impacts both echelon and supply chain costs. We show that the cost impact is higher as more decision makers enter a supply chain. Managerial implications: The cost of behavioral ordering is not consistent across the supply chain. Managers can use the estimation/simulation framework to analyze the impact of human behavior in their supply chains and evaluate improvement efforts such as coordination or information sharing. Our results show that behavioral ordering by a retailer has an out-sized impact on supply chain costs, which suggests that upstream echelons are better placed to make forecasting and replenishment decisions.

Contextual Trustworthiness of Organizational Partners: Evidence from Nine School Networks

2020 ◽  
Author(s):  
Samantha M. Keppler ◽  
Karen R. Smilowitz ◽  
Paul M. Leonardi
Keyword(s):  
Qualitative Study ◽  
Contextual Factors ◽  
Problem Definition ◽  
Practical Relevance ◽  
High Quality ◽  
School Networks ◽  
12Th Grade ◽  
Service Relationships ◽  
Managerial Implications ◽  
The Relationship

Problem definition: Trustworthy partners in procurement and service relationships are an asset. How can organizations discern trustworthy from untrustworthy partners, especially early on, so as to not waste time or resources on bad relationships? Academic/practical relevance: Like prior studies, we take the perspective that organizations rarely know whether a partner is trustworthy, but also that organizations often have some evidence of a partner’s trustworthiness, even before interacting. We argue a qualitative study is needed to understand how people discern a partner’s trustworthiness and the consequences of initial perceptions on the relationship trajectory. Methodology: We conduct an interview-based study of how people discern trustworthy partners in a setting where doing so is challenging: the education sector. Kindergarten-through-12th-grade schools must choose outside partners to rely on for resources or services the school cannot afford. Potential partners are numerous and of variable trustworthiness. Results: We find people use contextual factors as evidence of a potential partner’s trustworthiness, such as the partner’s institutional affiliations, physical proximity, and relationships with other schools. Sometimes the evidence indicates that a partner acts intrinsically trustworthily, regardless of these contextual factors. In other cases, the evidence indicates a partner acts contextually trustworthily, meaning partners follow through in some conditions but not others. Intrinsically trustworthy partners provide valuable but standardized resources or services. Contextually trustworthy partners provide the competitive advantage: customized resources that are not easily accessible by other schools. Managerial implications: People in organizations identify trustworthy partners via contextual factors, which helps them determine whether a partner acts trustworthily independent of context or conditional on context. The value of intrinsically trustworthy partners derives from their low risk and high quality, whereas the value of contextually trustworthy partners derives from their willingness to customize resources or services to some—but not all—organizations.

scholarly journals Motivating Supplier Social Responsibility Under Incomplete Visibility

2020 ◽  
Vol 22 (6) ◽  
pp. 1268-1286 ◽  
Author(s):  
Tim Kraft ◽  
León Valdés ◽  
Yanchong Zheng
Keyword(s):  
Supply Chain ◽  
Social Responsibility ◽  
Investment Decision ◽  
Problem Definition ◽  
Third Party ◽  
Theoretic Model ◽  
Practical Relevance ◽  
Managerial Implications ◽  
Game Theoretic ◽  
Game Theoretic Model

Problem definition: We examine how a profit-driven firm (she) can motivate better social responsibility (SR) practices by a supplier (he) when these practices cannot be perfectly observed by the firm. We focus on the firm’s investment in the supplier’s SR capabilities. To capture the influence of consumer demands, we incorporate the potential for SR information to be disclosed by the firm or revealed by a third party. Academic/practical relevance: Most firms have limited visibility into the SR practices of their suppliers. However, there is little research on how a firm under incomplete visibility should (i) invest to improve a supplier’s SR practices and (ii) disclose SR information to consumers. We address this gap. Methodology: We develop a game-theoretic model with asymmetric information to study a supply chain with one supplier and one firm. The firm makes her investment decision given incomplete information about the supplier’s current SR practices. We analyze and compare two settings: the firm does not disclose versus she discloses SR information to the consumers. Results: The firm should invest a high (low) amount in the supplier’s capabilities if the information she observes suggests the supplier’s current SR practices are poor (good). She should always be more aggressive with her investment when disclosing (versus not disclosing). This more aggressive strategy ensures better supplier SR practices under disclosure. When choosing between disclosing and not disclosing, the firm most likely prefers not to disclose when the supplier’s current SR practices seem to be average. Managerial implications: (i) Greater visibility helps the firm to better tailor her investment to the level of support needed. (ii) Better visibility also makes the firm more “truthful” in her disclosure, whereas increased third-party scrutiny makes her more “cautious.” (iii) Mandating disclosure is most beneficial for SR when the suppliers’ current practices seem to be average.

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