This paper considers the stock rationing problem of a single-item, make-to-stock production system with several demand classes and lost sales. For the case of Poisson demands and exponential production times, we show that the optimal policy can be characterized by a sequence of monotone stock rationing levels. For each demand class, there exists a stock rationing level at or below which it is optimal to start rejecting the demand of this class in anticipation of future arrival of higher priority demands. A simple queueing model is analyzed to compute the operating cost of a rationing policy. In a numerical study, we compare the optimal rationing policy with a first-come first-served policy to investigate the benefit of stock rationing under different operating conditions of the system.inventory/production, inventory rationing, dynamic programming/optimal control, applications

We study a supply chain with manufacturer encroachment in which product quality is endogenous and customers have heterogeneous preferences for quality. It is known that, when quality is exogenous, encroachment could make the retailer better-off. Yet when quality is endogenous and the manufacturer has enough flexibility in adjusting quality, we find that encroachment always makes the retailer worse-off in a large variety of scenarios. We also establish that, while a higher manufacturer's cost of quality hurts the retailer in absence of encroachment, it could benefit the retailer with encroachment. In addition, we show that a manufacturer offering differentiated products through two channels prefers to sell its high-quality product through the direct channel. Contrary to conventional wisdom, quality differentiation does not always benefit either manufacturer or retailer. Our results may explain why, despite extant theoretical predictions, retailers almost always resent encroachment. These findings also suggest that firms must be cautious when adopting quality differentiation as a strategy to ease channel conflict caused by encroachment.

We investigate contracting and information sharing in two competing supply chains, each consisting of one manufacturer and one retailer. The two supply chains are identical, except they may have different investment costs for information sharing. The problem is studied using a two-stage game. In the first stage, the manufacturers decide whether to invest in information sharing. In the second stage, given the information structure created in the first stage, the manufacturers offer contracts to their retailers and the retailers engage in Cournot competition. We analyze the game for two different contract types. For the case of contract menus, a supply chain that does not have information sharing will lower its selling quantities because of the negative quantity distortions in the contract menus, thus creating a strategic disadvantage in Cournot competition. The value of information sharing to a supply chain is positive, and the dominant strategy of each supply chain is to invest in information sharing when the investment costs are low. We fully characterize the equilibrium information sharing decisions under different investment costs. For the case of linear price contracts, the value of information sharing to a supply chain becomes negative, and the dominant strategy of each supply chain is not to invest in information sharing regardless of investment costs. Our results highlight the importance of contract type as a driver of the value of information sharing and the role of information sharing capability as a source of competitive advantage under supply chain competition.supply chain competition, incentive contracts, asymmetric information, information sharing

This paper studies the incentive for vertical information sharing in competing supply chains with production technologies that exhibit diseconomies of scale. We consider a model of two supply chains each consisting of one manufacturer selling to one retailer, with the retailers engaging in Cournot or Bertrand competition. For Cournot retail competition, we show that information sharing benefits a supply chain when (1) the production diseconomy is large and (2) either competition is less intense or at least one retailer's information is less accurate. A supply chain may become worse off when making its information more accurate or production diseconomy smaller, if such an improvement induces the firms in the rival supply chain to cease sharing information. For Bertrand retail competition, we show that information sharing benefits a supply chain when (1) the production diseconomy is large and (2) either competition is less intense or information is more accurate. Under Bertrand competition a manufacturer may be worse off by receiving information, which is never the case under Cournot competition. Information sharing in one supply chain triggers a competitive reaction from the other supply chain and this reaction is damaging to the first supply chain under Cournot competition but may be beneficial under Bertrand competition. This paper was accepted by Martin Lariviere, operations management.supply chain management, supply chain competition, information sharing

W e study the problem of information sharing in a supply chain with two competing manufacturers selling substitutable products through a common retailer. Our analysis shows that the retailer's incentive to share information strongly depends on nonlinear production cost, competition intensity, and whether the retailer can offer a contract to charge a payment for the information. Without information contracting, the retailer has an incentive to share information for free when production economy is large but has no incentive to do so when there is production diseconomy. With information contracting, the retailer has an incentive to share information when either production diseconomy/economy is large or competition is intense. We characterize the conditions under which the retailer shares information with none, one, or both of the manufacturers. We also show that the retailer prefers to sell information sequentially rather than concurrently to the manufacturers, whereas the manufacturers' preferences are reversed.

No abstract

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Concurrent design can reduce the time required to develop new products and redesign old ones. In contrast to the conventional approach, in which the product design is (nearly) completed before it is "thrown over the wall" to the process design group, concurrent design for manufacturability, as conceptualized here, conducts a number of progress reviews during the product design process. Frequent reviews have two benefits: (1) (Parallel Development) process designers receive sufficient information about the design to enable them to work in parallel with the product designers, and (2) (Quality Control) flaws in the design are discovered soon after they are introduced, saving the time and resources required for redesign later. The disadvantage of frequent reviews is that each review requires setup/penalty time that otherwise would not be required. The optimal policy is derived for some special stationary cases of the model. When the parallel development benefit dominates, the review periods either increase or decrease according to the rate at which product design work empowers useful process design work to be conducted. When the quality control benefit dominates, the review periods will vary only to the extent that the quality related parameters change. Numerical examples illustrate the insights gained from the analysis.concurrent design, concurrent engineering, simultaneous engineering, product design, process design, parallel development, quality control, progress reviews, optimization, quadratic program