Optimal outbound dispatch policies: Modeling inventory and cargo capacity

In this paper, we present an optimization model for coordinating inventory and transportation decisions at an outbound distribution warehouse that serves a group of customers located in a given market area. For the practical problems which motivated this paper, the warehouse is operated by a third party logistics provider. However, the models developed here may be applicable in a more general context where outbound distribution is managed by another supply chain member, e.g., a manufacturer. We consider the case where the aggregate demand of the market area is constant and known per period (e.g., per day). Under an immediate delivery policy, an outbound shipment is released each time a demand is realized (e.g., on a daily basis). On the other hand, if these shipments are consolidated over time, then larger (hence more economical) outbound freight quantities can be dispatched. In this case, the physical inventory requirements at the third party warehouse (TPW) are determined by the consolidated freight quantities. Thus, stock replenishment and outbound shipment release policies should be coordinated. By optimizing inventory and freight consolidation decisions simultaneously, we compute the parameters of an integrated inventory/outbound transportation policy. These parameters determine: (i) how often to dispatch a truck so that transportation scale economies are realized and timely delivery requirements are met, and (ii) how often, and in what quantities, the stock should be replenished at the TPW. We prove that the optimal shipment release timing policy is nonstationary, and we present algorithms for computing the policy parameters for both the uncapacitated and finite cargo capacity problems. The model presented in this study is considerably different from the existing inventory/transportation models in the literature. The classical inventory literature assumes that demands should be satisfied as they arrive so that outbound shipment costs are sunk costs, or else these costs are covered by the customer. Hence, the classical literature does not model outbound transportation costs. However, if a freight consolidation policy is in place then the outbound transportation costs can no longer be ignored in optimization. Relying on this observation, this paper models outbound transportation costs, freight consolidation decisions, and cargo capacity constraints explicitly. © 2002 Wiley Periodicals, Inc. Naval Research Logistics 49: 531–556, 2002; Published online in Wiley InterScience (www.interscience.wiley.com). DOI 10.1002/nav.10030     

Nonrobustness of the normal approximation of lead‐time demand in a (Q,R) system

For computing an optimal (Q, R) or kindred inventory policy, the current literature provides mixed signals on whether or when it is safe to approximate a nonnormal lead‐time‐demand (“LTD”) distribution by a normal distribution. The first part of this paper examines this literature critically to justify why the issue warrants further investigations, while the second part presents reliable evidence showing that the system‐cost penalty for using the normal approximation can be quite serious even when the LTD‐distribution's coefficient of variation is quite low—contrary to the prevalent view of the literature. We also identify situations that will most likely lead to large system‐cost penalty. Our results indicate that, given today's technology, it is worthwhile to estimate an LTD‐distribution's shape more accurately and to compute optimal inventory policies using statistical distributions that more accurately reflect the LTD‐distributions' actual shapes. © 2003 Wiley Periodicals, Inc. Naval Research Logistics, 2003     

Determination of burn‐in parameters and residual life for highly reliable products

Today, many products are designed and manufactured to function for a long period of time before they fail. Determining product reliability is a great challenge to manufacturers of highly reliable products with only a relatively short period of time available for internal life testing. In particular, it may be difficult to determine optimal burn‐in parameters and characterize the residual life distribution. A promising alternative is to use data on a quality characteristic (QC) whose degradation over time can be related to product failure. Typically, product failure corresponds to the first passage time of the degradation path beyond a critical value. If degradation paths can be modeled properly, one can predict failure time and determine the life distribution without actually observing failures. In this paper, we first use a Wiener process to describe the continuous degradation path of the quality characteristic of the product. A Wiener process allows nonconstant variance and nonzero correlation among data collected at different time points. We propose a decision rule for classifying a unit as normal or weak, and give an economic model for determining the optimal termination time and other parameters of a burn‐in test. Next, we propose a method for assessing the product's lifetime distribution of the passed units. The proposed methodologies are all based only on the product's initial observed degradation data. Finally, an example of an electronic product, namely contact image scanner (CIS), is used to illustrate the proposed procedure. © 2002 Wiley Periodicals, Inc. Naval Research Logistics, 2003     

Exact algorithms for scheduling multiple families of jobs on parallel machines

In many practical manufacturing environments, jobs to be processed can be divided into different families such that a setup is required whenever there is a switch from processing a job of one family to another job of a different family. The time for setup could be sequence independent or sequence dependent. We consider two particular scheduling problems relevant to such situations. In both problems, we are given a set of jobs to be processed on a set of identical parallel machines. The objective of the first problem is to minimize total weighted completion time of jobs, and that of the second problem is to minimize weighted number of tardy jobs. We propose column generation based branch and bound exact solution algorithms for the problems. Computational experiments show that the algorithms are capable of solving both problems of medium size to optimality within reasonable computational time. © 2003 Wiley Periodicals, Inc. Naval Research Logistics 50: 823–840, 2003.     

An exact analysis of a joint production‐inventory problem in two‐echelon inventory systems

We consider a two‐echelon inventory system with a manufacturer operating from a warehouse supplying multiple distribution centers (DCs) that satisfy the demand originating from multiple sources. The manufacturer has a finite production capacity and production times are stochastic. Demand from each source follows an independent Poisson process. We assume that the transportation times between the warehouse and DCs may be positive which may require keeping inventory at both the warehouse and DCs. Inventory in both echelons is managed using the base‐stock policy. Each demand source can procure the product from one or more DCs, each incurring a different fulfilment cost. The objective is to determine the optimal base‐stock levels at the warehouse and DCs as well as the assignment of the demand sources to the DCs so that the sum of inventory holding, backlog, and transportation costs is minimized. We obtain a simple equation for finding the optimal base‐stock level at each DC and an upper bound for the optimal base‐stock level at the warehouse. We demonstrate several managerial insights including that the demand from each source is optimally fulfilled entirely from a single distribution center, and as the system's utilization approaches 1, the optimal base‐stock level increases in the transportation time at a rate equal to the demand rate arriving at the DC. © 2011 Wiley Periodicals, Inc. Naval Research Logistics, 2011     

Approximation methods for the analysis of a multicomponent,multiproduct assemble‐to‐order system

In this article, we consider the performance evaluation of a multicomponent, multiproduct assemble‐to‐order (ATO) system. Each component is managed independently using a base‐stock policy at a supply facility with limited production capacity and an infinite buffer. The arrivals of demands follow a multivariate Poisson process and unfilled demands are backlogged. Because exact analysis of the proposed system is not feasible, we propose two approximation methods which provide upper and lower bounds for various performance measures such as fill rate, average waiting time, and average number of backorders of the proposed system. Our computational experiments demonstrate the effectiveness of the two approximation methods under various system settings. © 2011 Wiley Periodicals, Inc. Naval Research Logistics, 2011     

Combining standardized time series area and Cramér–von Mises variance estimators

We propose three related estimators for the variance parameter arising from a steady‐state simulation process. All are based on combinations of standardized‐time‐series area and Cramér–von Mises (CvM) estimators. The first is a straightforward linear combination of the area and CvM estimators; the second resembles a Durbin–Watson statistic; and the third is related to a jackknifed version of the first. The main derivations yield analytical expressions for the bias and variance of the new estimators. These results show that the new estimators often perform better than the pure area, pure CvM, and benchmark nonoverlapping and overlapping batch means estimators, especially in terms of variance and mean squared error. We also give exact and Monte Carlo examples illustrating our findings.© 2007 Wiley Periodicals, Inc. Naval Research Logistics, 2007     

Retailer's rationale to refuse consumer returns in supply chains

While accepting consumer returns has long been proposed as a solution to resolve the consumer valuation uncertainty problem, there are still a sizable portion of retailers who insist on a “no return” policy. In this article, we offer an economic rationale for these seemingly unreasonable strategies in a supply chain context. We demonstrate when and why the retailer may benefit from refusing consumer returns, even though offering consumer returns allows the supply chain to implement the expostmarket segmentation. Granting the retailer the right to refuse consumer returns may sometimes improve supply chain efficiency: it eliminates the manufacturer's attempt to induce inefficient consumer returns and bring the equilibrium back to that in the vertically integrated benchmark. We also find that the refund and the retail price can move in the opposite directions when product reliability varies, and consumer returns have a nontrivial impact on the quality choice. © 2015 Wiley Periodicals, Inc. Naval Research Logistics 62: 686–701, 2015     

Ungoverned space? Examining the FARC's interactions with local populations in Northern Ecuador

The Ecuadorian state has long been absent from the regions along its northern border with Colombia. I argue that this lack of state presence has allowed non-state armed groups and criminal organizations space to not only operate from these areas, but also, to challenge and change the relationship between local populations and the Ecuadorian state. After reviewing theoretical approaches to concepts of changing security paradigms and ungoverned space, the article details the conditions that have allowed armed groups, specifically the FARC, to take advantage of the lack of state presence along Ecuador's northern border.