Knowledge that Transforms

In this paper we consider a tactical production‐planning problem for remanufacturing when returns have different quality levels. Remanufacturing cost increases as the quality level decreases, and any unused returns may be salvaged at a value that increases with their quality level. Decision variables include the amount to remanufacture each period for each return quality level and the amount of inventory to carry over for future periods for both returns (unremanufactured), and finished remanufactured products. Our model is grounded with data collected at Pitney‐Bowes from their mailing systems remanufacturing operations. We derive some analytic properties for the optimal solution in the general case, and provide a simple greedy heuristic to computing the optimal solution in the case of deterministic returns and demand. Under mild assumptions, we find that the firm always remanufactures the exact demand in each period. We also study the value of a nominal quality‐grading system in planning production. Based on common industry parameters, we analyze, via a numerical study, the increase in profits observed by the firm if it maintains separate inventories for each quality grade. The results show that a grading system increases profit by an average of 4% over a wide range of parameter values commonly found in the remanufacturing industry; this number increases as the returns volume increases. We also numerically explore the case where there are capacity constraints and find the average improvement of a grading system remains around 4%.

Few papers have explored the optimal reserve prices in the name‐your‐own‐price (NYOP) channel with bidding options in a multiple channel environment. In this paper, we investigate a double‐bid business model in which the consumers can bid twice in the NYOP channel, and compare it with the single‐bid case. We also study the impact of adding a retailer‐own list‐price channel on the optimal reserve prices. This paper focuses on achieving some basic understanding on the potential gain of adding a second bid option to a single‐bid system and on the potential benefits of adding a list‐price channel by the NYOP retailer. We show that a double‐bid scenario can outperform a single‐bid scenario in both single‐channel and dual‐channel situations. The optimal reserve price in the double‐bid scenario is no less than that in the single‐bid case. Furthermore, the addition of a retailer‐own list‐price channel could push up the reserve prices in both single‐bid and double‐bid scenarios.

This paper considers the problem of disruption risk management in global supply chains. We consider a supply chain with two participants, who face interdependent losses resulting from supply chain disruptions such as terrorist strikes and natural hazards. The Harsanyi–Selten–Nash bargaining framework is used to model the supply chain participants' choice of risk mitigation investments. The bargaining approach allows a framing of both joint financing of mitigation activities before the fact and loss‐sharing net of insurance payouts after the fact. The disagreement outcome in the bargaining game is assumed to be the result of the corresponding non‐cooperative game. We describe an incentive‐compatible contract that leads to First Best investment and equal “gain” for all players, when the solution is “interior” (as it almost certainly is in practice). A supplier that has superior security practices (i.e., is inherently safer) exploits its informational advantage by extracting an “information rent” in the usual spirit of incomplete information games. We also identify a special case of this contract, which is robust to moral hazard. The role of auditing in reinforcing investment incentives is also examined.

We investigate resource‐constrained project scheduling with stochastic activity durations. Various objective functions related to timely project completion are examined, as well as the correlation between these objectives. We develop a GRASP‐heuristic to produce high‐quality solutions, using so‐called descriptive sampling. The algorithm outperforms existing algorithms for expected‐makespan minimization. The distribution of the possible makespan realizations for a given scheduling policy is also studied.

This paper considers the sale of a seasonal product in the face of strategic customers. At the beginning of the selling season, the retailer announces both the price p h at which the product will be sold during the selling season and the post‐season clearance price p< p h for unsold items. We analyze two operating regimes: The “no reservation regime” allows a buyer either to purchase the product at price p h when he arrives or to enter a lottery to purchase at price p if the product remains unsold. The “reservation regime” offers each buyer one extra option than the no reservation regime: reserve the product for purchase at the clearance price p. If the buyer reserves the product under the reservation regime and if it remains unsold at the end of the selling season, then he is obligated to purchase it at price p. We consider a situation in which heterogeneous customers with probabilistic valuation arrive in accord with a Poisson process. We characterize the rational purchasing behavior wherein each arriving customer is strategic; each customer takes other customers' purchasing behavior into consideration. By considering the Nash equilibrium of this game, we show that strategic customer behavior can render the customer to be worse off and the retailer to be better off under the reservation regime, despite the fact that this regime offers one extra option (reservation) to a customer. Hence, more purchasing options do not necessarily benefit customers.

For many product categories, manufacturers and retailers often offer rebates to stimulate sales. Due to certain adverse effects, however, some manufacturers and retailers are contemplating the elimination of their rebate programs. This paper sheds light on the debate about the value of rebate programs by presenting a model for evaluating the conditions under which a firm should offer rebates in a competitive environment. Specifically, we consider a two‐level supply chain comprising one manufacturer and one retailer. Each firm makes three decisions: the regular (wholesale or retail) price, whether or not to offer rebates, and the rebate value should the firm decide to launch a rebate program. We determine the equilibrium of a vertical competition game between the manufacturer (leader) and the retailer (follower), and we provide insights about how competition affects the conditions under which a firm should offer rebates in equilibrium.