The global markets of today offer to the "style goods" producer more selling opportunities and pose new challenges in production planning and coordination. From a production management standpoint the opportunity to exploit the difference in timing of the selling season of geographically dispersed markets for "style goods" is important for improving the firm's profitability. In this paper we examine the above issue with an insightful model of a producer of "style goods" selling the goods to two markets (a primary and a secondary market) with nonoverlapping selling seasons. We refer to this problem as the "global newsvendor" problem. For the above two market stochastic inventory systems we first develop optimal centralized control policies. Then we demonstrate the suboptimality of decentralized production control policies, with the production centers at each market treated as independent profit centers and a constant transfer price being used to coordinate their production. We propose as an effective alternative a decentralized production control structure with a nonlinear pricing scheme for production coordination among centers administered through an intermediate organizational unit. In our modeling, we explicitly consider the effects of exchange rate uncertainty on the production planning decisions.supply chain management, international operations management, inventory management
We consider a firm that procures and distributes a commodity from spot and forward markets under randomly fluctuating prices; the commodity is distributed downstream to a set of nonhomogeneous retailers to satisfy random demand. We formulate a model that allows one to compute approximate, but near optimal, procurement and distribution policies for this system, and we explore the value of the commodity's market in providing managers with (a) additional flexibility in procurement and (b) information on price dynamics generated through the trading of futures contracts. Our results indicate that the presence of the commodity market and the information that it conveys may lead to significant reductions in inventory-related costs; however, to obtain these benefits, both the spot procurement flexibility and the term structure of prices generated by the commodity market must be incorporated in the formulation of the operating policy. Managerial insights on the procurement strategy as a function of variability in prices and demand are also discussed. This paper was accepted by John Birge, focused issue editor.
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