IDEAS home Printed from https://ideas.repec.org/a/eee/ejores/v268y2018i1p148-160.html
   My bibliography  Save this article

Optimal periodic flexible policies for two-stage serial supply chains

Author

Listed:
  • Liu, Fang
  • Gavirneni, Srinagesh

Abstract

In a two-stage serial supply chain, a periodic flexible policy (PF policy) allows the retailer to receive fixed orders that may depend on demand history in one period of the ordering cycle and order freely in other periods. Existing literature has shown that certain PF policies can significantly reduce the inefficiency in a decentralized supply chain. However, these works have mostly defined and implemented ad-hoc periodic flexible policies and have not attempted to identify the optimal periodic flexible policies. In this paper, we characterize the structure of the optimal PF policy using calculus of variations. In particular, we show that under the optimal PF policy, the retailer receives shipments either according to a state dependent capacitated policy or a state dependent order up to policy. Furthermore, we can approximate the retailer’s optimal restricted ordering function by a piecewise linear function and show numerically that this approximation is near optimal.

Suggested Citation

  • Liu, Fang & Gavirneni, Srinagesh, 2018. "Optimal periodic flexible policies for two-stage serial supply chains," European Journal of Operational Research, Elsevier, vol. 268(1), pages 148-160.
    • Handle: RePEc:eee:ejores:v:268:y:2018:i:1:p:148-160
    DOI: 10.1016/j.ejor.2018.01.004
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0377221718300043
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ejor.2018.01.004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Dirk Bergemann & Juuso V‰lim‰ki, 2010. "The Dynamic Pivot Mechanism," Econometrica, Econometric Society, vol. 78(2), pages 771-789, March.
    2. Hau L. Lee & Kut C. So & Christopher S. Tang, 2000. "The Value of Information Sharing in a Two-Level Supply Chain," Management Science, INFORMS, vol. 46(5), pages 626-643, May.
    3. Gavirneni, Srinagesh, 2006. "Price fluctuations, information sharing, and supply chain performance," European Journal of Operational Research, Elsevier, vol. 174(3), pages 1651-1663, November.
    4. Lucy Gongtao Chen & Srinagesh Gavirneni, 2010. "Using Scheduled Ordering to Improve the Performance of Distribution Supply Chains," Management Science, INFORMS, vol. 56(9), pages 1615-1632, September.
    5. Terry A. Taylor & Erica L. Plambeck, 2007. "Simple Relational Contracts to Motivate Capacity Investment: Price Only vs. Price and Quantity," Manufacturing & Service Operations Management, INFORMS, vol. 9(1), pages 94-113, January.
    6. Susan Athey & Ilya Segal, 2013. "An Efficient Dynamic Mechanism," Econometrica, Econometric Society, vol. 81(6), pages 2463-2485, November.
    7. Erica L. Plambeck & Terry A. Taylor, 2006. "Partnership in a Dynamic Production System with Unobservable Actions and Noncontractible Output," Management Science, INFORMS, vol. 52(10), pages 1509-1527, October.
    8. Terry A. Taylor & Erica L. Plambeck, 2007. "Supply Chain Relationships and Contracts: The Impact of Repeated Interaction on Capacity Investment and Procurement," Management Science, INFORMS, vol. 53(10), pages 1577-1593, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Elena Belavina & Karan Girotra, 2012. "The Relational Advantages of Intermediation," Management Science, INFORMS, vol. 58(9), pages 1614-1631, September.
    2. Fang Liu & Tracy R. Lewis & Jing-Sheng Song & Nataliya Kuribko, 2019. "Long-Term Partnership for Achieving Efficient Capacity Allocation," Operations Research, INFORMS, vol. 67(4), pages 984-1001, July.
    3. Onur Kaya & Serra Caner, 2018. "Supply chain contracts for capacity decisions under symmetric and asymmetric information," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 26(1), pages 67-92, March.
    4. Hongmin Li & Hao Zhang & Charles H. Fine, 2013. "Dynamic Business Share Allocation in a Supply Chain with Competing Suppliers," Operations Research, INFORMS, vol. 61(2), pages 280-297, April.
    5. Plambeck, Erica L., 2012. "Reducing greenhouse gas emissions through operations and supply chain management," Energy Economics, Elsevier, vol. 34(S1), pages 64-74.
    6. Pastore, Erica & Alfieri, Arianna & Zotteri, Giulio, 2019. "An empirical investigation on the antecedents of the bullwhip effect: Evidence from the spare parts industry," International Journal of Production Economics, Elsevier, vol. 209(C), pages 121-133.
    7. , H. & ,, 2016. "Approximate efficiency in repeated games with side-payments and correlated signals," Theoretical Economics, Econometric Society, vol. 11(1), January.
    8. Julio B. Clempner, 2023. "A Dynamic Mechanism Design for Controllable and Ergodic Markov Games," Computational Economics, Springer;Society for Computational Economics, vol. 61(3), pages 1151-1171, March.
    9. Francis Bloch & David Cantala, 2013. "Markovian assignment rules," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 40(1), pages 1-25, January.
    10. Daley, Brendan & Schwarz, Michael & Sonin, Konstantin, 2012. "Efficient investment in a dynamic auction environment," Games and Economic Behavior, Elsevier, vol. 75(1), pages 104-119.
    11. Özalp Özer & Yanchong Zheng & Kay-Yut Chen, 2011. "Trust in Forecast Information Sharing," Management Science, INFORMS, vol. 57(6), pages 1111-1137, June.
    12. Said, Maher, 2012. "Auctions with dynamic populations: Efficiency and revenue maximization," Journal of Economic Theory, Elsevier, vol. 147(6), pages 2419-2438.
    13. Yi Tao & Loo Hay Lee & Ek Peng Chew, 2016. "Quantifying the Effect of Sharing Information in a Supply Chain Facing Supply Disruptions," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 33(04), pages 1-28, August.
    14. Wenming Xie & Yingxue Zhao & Zhibin Jiang & Pui-Sze Chow, 2016. "Optimizing product service system by franchise fee contracts under information asymmetry," Annals of Operations Research, Springer, vol. 240(2), pages 709-729, May.
    15. Mierendorff, Konrad, 2016. "Optimal dynamic mechanism design with deadlines," Journal of Economic Theory, Elsevier, vol. 161(C), pages 190-222.
    16. Babaioff, Moshe & Blumrosen, Liad & Roth, Aaron, 2015. "Auctions with online supply," Games and Economic Behavior, Elsevier, vol. 90(C), pages 227-246.
    17. Arya, Anil & Löffler, Clemens & Mittendorf, Brian & Pfeiffer, Thomas, 2015. "The middleman as a panacea for supply chain coordination problems," European Journal of Operational Research, Elsevier, vol. 240(2), pages 393-400.
    18. Krähmer, Daniel & Strausz, Roland, 2010. "Optimal Procurement Contracts with Pre–Project Planning," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 303, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    19. Samuel Antill & Darrell Duffie, 2021. "Augmenting Markets with Mechanisms [Optimal Execution of Portfolio Transactions]," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(4), pages 1665-1719.
    20. Sodhi, ManMohan S. & Tang, Christopher S., 2011. "The incremental bullwhip effect of operational deviations in an arborescent supply chain with requirements planning," European Journal of Operational Research, Elsevier, vol. 215(2), pages 374-382, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ejores:v:268:y:2018:i:1:p:148-160. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eor .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.