Export controls,market structure and international coordination

We look at the different ways of aggregating the exports of dual use products to give the security perception of exporter countries and their consistency with the relevant export control regimes. Also, we analyze different models of export controls highlighting the role of the perception of security, market structure and competition between exporting firms in determining the existence of multiple equilibria and therefore, the need for coordination between countries in setting export controls.     

A mathematical formulation and efficient heuristics for the dynamic container relocation problem

The container relocation problem (CRP) is concerned with emptying a single yard‐bay which contains J containers each following a given pickup order so as to minimize the total number of relocations made during their retrieval process. The CRP can be modeled as a binary integer programming (IP) problem and is known to be NP‐hard. In this work, we focus on an extension of the CRP to the case where containers are both received and retrieved from a single yard‐bay, and call it the dynamic container relocation problem. The arrival (departure) sequences of containers to (from) the yard‐bay is assumed to be known a priori. A binary IP formulation is presented for the problem. Then, we propose three types of heuristic methods: index based heuristics, heuristics using the binary IP formulation, and a beam search heuristic. Computational experiments are performed on an extensive set of randomly generated test instances. Our results show that beam search heuristic is very efficient and performs better than the other heuristic methods.Copyright © 2014 Wiley Periodicals, Inc. Naval Research Logistics 61: 101–118, 2014     

Optimal replacement of continuously degrading systems in partially observed environments

Motivated by wind energy applications, we consider the problem of optimally replacing a stochastically degrading component that resides and operates in a partially observable environment. The component's rate of degradation is modulated by the stochastic environment process, and the component fails when it is accumulated degradation first reaches a fixed threshold. Assuming periodic inspection of the component, the objective is to minimize the long‐run average cost per unit time of performing preventive and reactive replacements for two distinct cases. The first case examines instantaneous replacements and fixed costs, while the second considers time‐consuming replacements and revenue losses accrued during periods of unavailability. Formulated and solved are mixed state space, partially observable Markov decision process models, both of which reveal the optimality of environment‐dependent threshold policies with respect to the component's cumulative degradation level. Additionally, it is shown that for each degradation value, a threshold policy with respect to the environment belief state is optimal if the environment alternates between two states. The threshold policies are illustrated by way of numerical examples using both synthetic and real wind turbine data. © 2015 Wiley Periodicals, Inc. Naval Research Logistics 62: 395–415, 2015     

Selling to strategic and loss‐averse consumers: Stocking,procurement, and product design policies

Motivated by the presence of loss‐averse decision making behavior in practice, this article considers a supply chain consisting of a firm and strategic consumers who possess an S‐shaped loss‐averse utility function. In the model, consumers decide the purchase timing and the firm chooses the inventory level. We find that the loss‐averse consumers' strategic purchasing behavior is determined by their perceived gain and loss from strategic purchase delay, and the given rationing risk. Thus, the firm that is cognizant of this property tailors its inventory stocking policy based on the consumers' loss‐averse behavior such as their perceived values of gain and loss, and their sensitivity to them. We also demonstrate that the firm's equilibrium inventory stocking policy reflects both the economic logic of the traditional newsvendor inventory model, and the loss‐averse behavior of consumers. The equilibrium order quantity is significantly different from those derived from models that assume that the consumers are risk neutral and homogeneous in their valuations. We show that the firm that ignores strategic consumer's loss‐aversion behavior tends to keep an unnecessarily high inventory level that leads to excessive leftovers. Our numerical experiments further reveal that in some extreme cases the firm that ignores strategic consumer's loss‐aversion behavior generates almost 92% more leftovers than the firm that possesses consumers’ loss‐aversion information and takes it into account when making managerial decisions. To mitigate the consumer's forward‐looking behavior, we propose the adoption of the practice of agile supply chain management, which possesses the following attributes: (i) procuring inventory after observing real‐time demand information, (ii) enhanced design (which maintains the current production mix but improves the product performance to a higher level), and (iii) customized design (which maintains the current performance level but increases the variety of the current production line to meet consumers’ specific demands). We show that such a practice can induce the consumer to make early purchases by increasing their rationing risk, increasing the product value, or diversifying the product line. © 2015 Wiley Periodicals, Inc. Naval Research Logistics 62: 435–453, 2015     

The loss‐averse newsvendor problem with supply options

In this article, we consider a loss‐averse newsvendor with stochastic demand. The newsvendor might procure options when demand is unknown, and decide how many options to execute only after demand is revealed. If the newsvendor reserves too many options, he would incur high reservation costs. Yet reserving too few could result in lost sales. So the newsvendor faces a trade‐off between reservation costs and losing sales. When there are multiple options available, the newsvendor has to consider how many units of each to reserve by studying the trade‐off between flexibility and costs. We show how the newsvendor's loss aversion behavior affects his ordering decision, and propose an efficient algorithm to compute his optimal solution in the general case with n options. We also present examples showing how the newsvendor's ordering strategy changes as loss aversion rises. © 2014 Wiley Periodicals, Inc. 62:46–59, 2015     

Optimal and asymptotically optimal policies for assemble‐to‐order n‐ and W‐systems

We consider two specially structured assemble‐to‐order (ATO) systems—the N‐ and W‐systems—under continuous review, stochastic demand, and nonidentical component replenishment leadtimes. Using a hybrid approach that combines sample‐path analysis, linear programming, and the tower property of conditional expectation, we characterize the optimal component replenishment policy and common‐component allocation rule, present comparative statics of the optimal policy parameters, and show that some commonly used heuristic policies can lead to significant optimality loss. The optimality results require certain symmetry in the cost parameters. In the absence of this symmetry, we show that, for systems with high demand volume, the asymptotically optimal policy has essentially the same structure; otherwise, the optimal policies have no clear structure. For these latter systems, we develop heuristic policies and show their effectiveness. © 2016 Wiley Periodicals, Inc. Naval Research Logistics 62: 617–645, 2015     

Auctions in the post‐change‐order period

A change order is frequently initiated by either the supplier or the buyer, especially when the contract is long‐term or when the contractual design is complex. In response to a change order, the buyer can enter a bargaining process to negotiate a new price. If the bargaining fails, she pays a cancellation fee (or penalty) and opens an auction. We call this process the sequential bargaining‐auction (BA). At the time of bargaining, the buyer is uncertain as to whether the bargained price is set to her advantage; indeed, she might, or might not, obtain a better price in the new auction. To overcome these difficulties, we propose a new change‐order‐handling mechanism by which the buyer has an option to change the contractual supplier after bargaining ends with a bargained price. We call this the option mechanism. By this mechanism, the privilege of selling products or services is transferred to a new supplier if the buyer exercises the option. To exercise the option, the buyer pays a prespecified cash payment, which we call the switch price, to the original supplier. If the option is not exercised, the bargained price remains in effect. When a switch price is proposed by the buyer, the supplier decides whether or not to accept it. If the supplier accepts it, the buyer opens an auction. The option is exercised when there is a winner in the auction. This article shows how, under the option mechanism, the optimal switch price and the optimal reserve price are determined. Compared to the sequential BA, both the buyer and the supplier benefit. Additionally, the option mechanism coordinates the supply chain consisting of the two parties. © 2015 Wiley Periodicals, Inc. Naval Research Logistics 62: 248–265, 2015     

Sojourn times in a two‐stage queueing network with blocking

The model considered in this paper involves a tandem queue consisting of a sequence of two waiting lines. The main feature of our model is blocking, i.e., as soon as the second waiting line reaches a certain upper limit, the first line is blocked. The input of units to the tandem queue is the MAP (Markovian arrival process), and service requirements are of phase type. Our objective is to study the sojourn time distribution under the first‐come‐first‐serve discipline by analyzing the sojourn time through times until absorption in appropriately defined quasi‐birth‐and‐death processes and continuous‐time Markov chains. © 2004 Wiley Periodicals, Inc. Naval Research Logistics, 2004     

Economic ordering decisions with market choice flexibility

Standard approaches to classical inventory control problems treat satisfying a predefined demand level as a constraint. In many practical contexts, however, total demand is comprised of separate demands from different markets or customers. It is not always clear that constraining a producer to satisfy all markets is an optimal approach. Since the inventory‐related cost of an item depends on total demand volume, no clear method exists for determining a market's profitability a priori, based simply on per unit revenue and cost. Moreover, capacity constraints often limit a producer's ability to meet all demands. This paper presents models to address economic ordering decisions when a producer can choose whether to satisfy multiple markets. These models result in a set of nonlinear binary integer programming problems that, in the uncapacitated case, lend themselves to efficient solution due to their special structure. The capacitated versions can be cast as nonlinear knapsack problems, for which we propose a heuristic solution approach that is asymptotically optimal in the number of markets. The models generalize the classical EOQ and EPQ problems and lead to interesting optimization problems with intuitively appealing solution properties and interesting implications for inventory and pricing management. © 2003 Wiley Periodicals, Inc. Naval Research Logistics, 2004.