Knowledge that Transforms

Online discount voucher market In the discount voucher market, customers usually face two types of valuation uncertainty, namely, preference uncertainty and consumption state uncertainty . Preference uncertainty is related to the customer's lack of relevant experience with the merchant, whereas consumption state uncertainty is related to the advance selling nature of the discount voucher mechanism. By taking a comprehensive perspective (i.e., considering revenue management and promotion effect at the same time), we find (i) no show of voucher buyers may not be a good thing for the merchant, especially for those large or start‐up ones; (ii) offering refund may always hurt the merchant's profit and the PayPal model may not be optimal in terms of maximizing social welfare; and (iii) market segmentation is not necessary for the profitability of promotion.

This study considers a typical scheduling environment that is influenced by the behavioral phenomenon of multitasking. Under multitasking, the processing of a selected job suffers from interruption by other jobs that are available but unfinished. This situation arises in a wide variety of applications; for example, administration, manufacturing, and process and project management. Several classical solution methods for scheduling problems no longer apply in the presence of multitasking. The solvability of any scheduling problem under multitasking is no easier than that of the corresponding classical problem. We develop optimal algorithms for some fundamental and practical single machine scheduling problems with multitasking. For other problems, we show that they are computationally intractable, even though in some cases the corresponding problem in classical scheduling is efficiently solvable. We also study the cost increase and value gained due to multitasking. This analysis informs companies about how much it would be worthwhile to invest in measures to reduce or encourage multitasking.

While there have been vast discussions on the materialistic benefits of continuous improvement from the Toyota and Honda experiences, the academic literature pays little attention to information sharing. In this study, we construct a dynamic adverse selection model in which the supplier privately observes her production efficiency, and in the contractual duration the manufacturer obtains an informative but imprecise signal regarding this private efficiency. We show that despite the disclosure of proprietary information, information sharing may benefit the supplier; the supplier's voluntary participation is more likely to occur when the shared information is rather imprecise. On the other hand, our analysis also reveals that this information sharing unambiguously gives rise to an upward push of the production quantity, and may sometimes lead to an upward distortion that ultimately hurts the supply chain. We also document the non‐trivial impact of the timing of information sharing on the supplier's incentive to participate.

This study considers a supply chain with two heterogeneous suppliers and a common retailer whose type is either low‐volume or high‐volume. The retailer's type is unknown to the suppliers. The flexible supplier has a high variable cost and a low fixed cost, while the efficient supplier has a low variable cost and a high fixed cost. Each supplier offers the retailer a menu of contracts. The retailer chooses the contract that maximizes its expected profit. For this setting, we characterize the equilibrium contract menus offered by the suppliers to the retailer. We find that the equilibrium contract menus depend on which supplier–retailer match can generate the highest supply chain profit and on how much information rent the supplier may need to pay. An important feature of the equilibrium contract menus is that the contract assigned to the more profitable retailer will coordinate the supply chain, while the contract assigned to the less profitable retailer may not. In addition, in some circumstances, the flexible supplier may choose not to serve the high‐volume retailer, in order to avoid excessive information rent.

Should capacitated firms set prices responsively to uncertain market conditions in a competitive environment? We study a duopoly selling differentiated substitutable products with fixed capacities under demand uncertainty, where firms can either commit to a fixed price ex ante , or elect to price contingently ex post , e.g., to charge high prices in booming markets, and low prices in slack markets. Interestingly, we analytically show that even for completely symmetric model primitives, asymmetric equilibria of strategic pricing decisions may arise, in which one firm commits statically and the other firm prices contingently; in this case, there also exists a unique mixed strategy equilibrium. Such equilibrium behavior tends to emerge, when capacity is ampler, and products are less differentiated or demand uncertainty is lower. With asymmetric fixed capacities, if demand uncertainty is low, a unique asymmetric equilibrium emerges, in which the firm with more capacity chooses committed pricing and the firm with less capacity chooses contingent pricing. We identify two countervailing profit effects of contingent pricing under competition: gains from responsively charging high price under high demand, and losses from intensified price competition under low demand. It is the latter detrimental effect that may prevent both firms from choosing a contingent pricing strategy in equilibrium. We show that the insights remain valid when capacity decisions are endogenized. We caution that responsive price changes under aggressive competition of less differentiated products can result in profit‐killing discounting.

Lateral transshipments are a method of responding to shortages of stock in a network of inventory‐holding locations. Conventional reactive approaches only seek to meet immediate shortages. The study proposes hybrid transshipments which exploit economies of scale by moving additional stock between locations to prevent future shortages in addition to meeting immediate ones. The setting considered is motivated by retailers who operate networks of outlets supplying car parts via a system of periodic replenishment. It is novel in allowing non‐stationary stochastic demand and general patterns of dependence between multiple item types. The generality of our work makes it widely applicable. We develop an easy‐to‐compute quasi‐myopic heuristic for determining how hybrid transshipments should be made. We obtain simple characterizations of the heuristic and demonstrate its strong cost performance in both small and large networks in an extensive numerical study.

Every production planning concept that incorporates controlled order release will initially withhold jobs from the shop floor and create a pre‐shop pool. Order release is a key component of the Workload Control concept that aims to maintain work‐in‐process within limits while ensuring due dates are met. Order release includes two decisions: (i) a sequencing decision that establishes the order in which jobs are considered for release; and, (ii) a selection decision that determines the criteria for choosing jobs for release. While selection has received much research attention, sequencing has been largely neglected. Using simulation, this study uncovers the potential for performance improvement in the sequencing decision and improves our understanding of how order release methods should be designed. Although most prior studies apply time‐oriented sequencing rules and load‐oriented selection rules, analysis reveals that load balancing considerations should also be incorporated in the sequencing decision. But an exclusive focus on load balancing is shown to increase mean tardiness and, paradoxically, require high workloads. A new sequencing rule is developed that only balances loads when multiple orders become urgent. It avoids high mean tardiness and allows the shop to operate at a low workload level. At the same time, the percentage tardy is reduced by up to 50% compared to a purely time‐oriented rule. The findings have implications not only for Workload Control but for any concept that features order release control, such as ConWIP and Drum‐Buffer‐Rope.

With increasing frequency, firms are locating their operations in disparate countries with distinct national cultures and languages. This study develops and empirically tests hypotheses relating an operation's process compliance performance to (1) the presence of a language difference between the location of the operation and that of headquarters and (2) the national culture of the location of the operation and that of headquarters. Employing an international sample of pharmaceutical manufacturing plants located primarily in Western nations, the analysis reveals that a language difference between the location of a plant and the firm's headquarters is consistently related to decreased process compliance at the plant level. Regarding national culture, only limited evidence of a direct relationship between national cultural dimensions (at either the plant or headquarters location) and process compliance exists. However, the analysis does suggest that cultural congruence between the location of the plant and that of headquarters can relate to improved compliance performance. Such a relationship depends on the specific national cultural dimension studied. While these results are obtained in a specific manufacturing setting, they potentially have implications for process compliance in any global operation.

It is common for a firm to make use of multiple suppliers of different delivery lead times, reliabilities, and costs. In this study, we are concerned with the joint pricing and inventory control problem for such a firm that has a quick‐response supplier and a regular supplier that both suffer random disruptions, and faces price‐sensitive random demands. We aim at characterizing the optimal ordering and pricing policies in each period over a planning horizon, and analyzing the impacts of supply source diversification. We show that, when both suppliers are unreliable, the optimal inventory policy in each period is a reorder point policy and the optimal price is decreasing in the starting inventory level in that period. In addition, we show that having supply source diversification or higher supplier reliability increases the firm's optimal profit and lowers the optimal selling price. We also demonstrate that, with the selling price as a decision, a supplier may receive even more orders from the firm after an additional supplier is introduced. For the special case where the quick‐response supplier is perfectly reliable, we further show that the optimal inventory policy is of a base‐stock type and the optimal pricing policy is a list‐price policy with markdowns.

Based on a serial supply chain model with two periods and price‐sensitive demand, we present the first experimental test of the effect of strategic inventories on supply chain performance. In theory, if holding costs are sufficiently low, the buyer builds up a strategic inventory (even if no operational reasons for stock‐holding exist) to limit the supplier's market power, and to increase the own profit share. As it turns out, this enhances the overall supply chain performance. The supplier anticipates the effect of the strategic inventory and differentiates prices to capture a part of the increased supply chain profits. Our results show that the positive effects of strategic inventories are even more pronounced than theoretically predicted, because strategic inventories empower buyers by shifting the perception of the fair split. Overall, strategic inventories have a double positive effect, a strategic and a behavioral, both reducing the average wholesale prices and dampening the double marginalization effect. The latter effect leads to more equitable payoffs.