Cost allocation in continuous-review inventory models

Hartman, Bruce C.; Dror, Moshe

doi:10.1002/(sici)1520-6750(199606)43:4<549::aid-nav7>3.0.co;2-7

Cited by 76 publications

(39 citation statements)

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“…Splitting of gains due to consolidation of orders in the multi-store Economic Order Quantity (EOQ) with safety stock is analyzed in Gerchak and Gupta (1991). Later, in Hartman and Dror (1996) is considered, in which the retailers may hold separate inventories, thus transshipment costs may be involved. The papers show that the core of any general news-vendor game of this type is non-empty.…”

Section: Introductionmentioning

confidence: 99%

Cooperation in Service Systems

Anily

Haviv

2010

Operations Research

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We consider a number of servers that may improve the efficiency of the system by pooling their service capacities to serve the union of the individual streams of customers. This economies of scope phenomenon is due to the reduction in the steady-state mean total number of customers in system. The question we pose is how the servers should split among themselves the cost of the pooled system. When the individual incoming streams of customers form Poisson processes and individual service times are exponential, we define a transferable utility cooperative game in which the cost of a coalition is the mean number of customers (or jobs) in the pooled system. We show that albeit the fact the characteristic function is neither monotone nor concave, the game (and its subgames) possess non-empty cores. In other words, for any subset of servers there exist cost-sharing allocations under which no partial subset can take advantage by breaking away and forming a separate coalition. We give an explicit expression for all (infinitely many) non-negative core cost allocations of this game. Finally, we show that except for the case where all individual servers have the same cost, there exist infinitely many core allocations with negative entries, and we show how to construct a convex subset of the core where at least one server is being paid in order to join the grand coalition.

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Section: Introductionmentioning

confidence: 99%

Cooperation in Service Systems

Anily

Haviv

2010

Operations Research

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“…In our setting, the supplier holds her wholesale price constant even when capacity is scarce, which is frequently observed in the automobile industry. There are several papers that consider the allocation of inventory among retailers in both competitive and cooperative settings, but all assume infinite supplier capacity (e.g., Anupindi and Bassok 1998;Deneckere et al 1996;Hartman and Dror 1996;Lippman and McCardle 1997).…”

Section: Introductionmentioning

confidence: 99%

Capacity Allocation Using Past Sales: When to Turn-and-Earn

1999

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C onsider a supplier selling to multiple retailers. Demand varies across periods, but the supplier's capacity and wholesale price are fixed. If demand is high, the retailers' needs exceed capacity, and the supplier must implement an allocation mechanism to dole out production. We examine how the choice of mechanism impacts retailer actions and supply chain performance. In particular, we analyze turn-and-earn allocation, a method commonly used in the automobile industry. This scheme bases current allocations on past sales and thus enables retailers to influence their future allocations; they compete for scarce capacity even if they do not compete for customers.We show that turn-and-earn induces the retailers to increase their sales when demand is low and the supplier's capacity is otherwise underutilized. Supplier profits thus increase. The impact on the supply chain depends on how restrictive capacity is. With mildly tight capacity, the retailers' higher sales rate does not significantly lower their profits but does reduce the cost of idle capacity. Supply chain performance improves. With extremely tight capacity, the retailers' intense competition dissipates more profits than the supplier gains, and supply chain performance suffers. Consequently, turn-and-earn does not generally coordinate the system. It is best characterized as a means for the supplier to increase her profits at the expense of the retailers and potentially even the supply chain. Furthermore, these results hold even if the retailers can hold inventory in anticipation of scarce capacity.

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“…A rule, based on quantity discount, is also proposed to implement a profit sharing mechanism for achieving equal division of additional cooperative system profits. In (Hartman & Dror, 1996) the cost allocation problem for the centralized and continuousreview inventory system is studied. They proposed three necessary criteria (stability, justifiability and polynomial computability) for appropriating selection of an allocation rule.…”

Section: Review Of the Literature On Supply Chain Gamesmentioning

confidence: 99%