The impact of manufacturer rebates on supply chain profits

Manufacturer rebates are commonly used as price discount tools for attracting end customers. In this study, we consider a two‐stage supply chain with a manufacturer and a retailer, where a single seasonal product faces uncertain and price‐sensitive demand. We characterize the impact of a manufacturer rebate on the expected profits of both the manufacturer and the retailer. We show that unless all of the customers claim the rebate, the rebate always benefits the manufacturer. Our results thus imply that “mail‐in rebates,” where some customers end up not claiming the rebate, particularly when the size of the rebate is relatively small, always benefit the manufacturer. On the other hand, an “instant rebate,” such as the one offered in the automotive industry where every customer redeems the rebate on the spot when he/she purchases a car, does not necessarily benefit the manufacturer. © 2007 Wiley Periodicals, Inc. Naval Research Logistics, 2007     

A supply chain design model with unreliable supply

Uncertainties abound within a supply chain and have big impacts on its performance. We propose an integrated model for a three‐tiered supply chain network with one supplier, one or more facilities and retailers. This model takes into consideration the unreliable aspects of a supply chain. The properties of the optimal solution to the model are analyzed to reveal the impacts of supply uncertainty on supply chain design decisions. We also propose a general solution algorithm for this model. Computational experience is presented and discussed. © 2007 Wiley Periodicals, Inc. Naval Research Logistics, 2007     

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     

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     

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     

Women and the military

Debates about the relationship between women and the military have become common within Western societies. These debates primarily centre on the issue of the place, fitness and desirability of a female presence within institutions designed for national war making. There are those who claim that equality betwen the sexes demands the full integration of women into national militaries, including in combat roles, others however argue that women are ill‐equipped for the traditional tasks required of ‘warriors’. This article argues that these debates are increasingly irrelevant. Future wars are increasingly less likely to be fought only by clearly defined national combat forces and more likely to be ‘virtual’ wars involving the deployment of Western technologies against militarily inferior opponents. This too is an age in which Western states will be engaged not just in virtual wars but in ‘humanitarian intervention’, peacekeeping, enforcement and postwar reconstruction. This allows, even encourages, a rethinking of traditional notions and debates over the place of women within the military sphere.