Effects of Centralization on Expected Costs in a Multi-location Newsboy Problem

Chen, Miao-Sheng; Lin, Chin‐Tsai

doi:10.1057/palgrave.jors.0400609

Cited by 8 publications

(16 citation statements)

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“…Chen and Lin [4] generalize Eppen [8] 's results to any non-negative probability distribution with concave h(x) and p(x) functions. In the decentralized system, as h(x) = p(x) = 0 for all x ≤ 0, and hence Equation (4) can be written as…”

Section: Literature Review: Some Important Findingsmentioning

confidence: 69%

On the effects of risk pooling in supply chain management: Review and extensions

2009

Acta Math. Appl. Sin. Engl. Ser.

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The primary challenge in supply chain management (SCM) is matching supply with uncertain demand. Risk pooling is an efficient and promising strategy to meet this challenge by reducing the underlying demand uncertainty through aggregation. The main focus of this paper is to analyze the effects of risk pooling under different supply chain settings. There are two main contributions. First, we propose a mathematical framework which serves the multi-purpose of (1) unifying existing models on risk pooling in the literature, (2) providing new facets and insights of understanding existing results on risk pooling, and (3) setting up new ground for extending existing models and results. Second, we investigate one interesting effect of risk pooling, namely, the decreasing marginal return (or supermodularity). We show that there are decreasing marginal returns in risk pooling practices under certain conditions, specifically when the demand is independent and identically distributed (I.I.D.) and normally distributed.

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Section: Literature Review: Some Important Findingsmentioning

confidence: 69%

On the effects of risk pooling in supply chain management: Review and extensions

2009

Acta Math. Appl. Sin. Engl. Ser.

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“…Indeed, it is beneficial even if we choose to use the sum of the individual inventories (rather than the optimal pooled amount) (e.g., Eppen, 1979;Chen and Lin, 1989;Cherikh, 2000;Gerchak and He, 2003;Cai and Du, 2009). With convex costs, however, the situation is not clear.…”

Section: Pooled Inventorymentioning

confidence: 99%

“…To generate analytical insights, we provide examples with uniform and exponential demand, and quadratic, cubic and exponential cost functions. We then analyse inventory pooling (e.g., Eppen, 1979;Chen and Lin, 1989;Cherikh, 2000;Gerchak and He, 2003;Sobel 2008;Yang and Schrage, 2009;Cai and Du, 2009) with nonlinear production costs. Inventory pooling, whether physical or virtual, reduces effective demand variability, and thus reduces (linear) expected costs, provided that transshipment is not too expensive.…”

Section: Introductionmentioning

confidence: 99%

Manufacturing newsvendors and inventory pooling with nonlinear production costs

Gerchak

2016

IJIR

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Abstract:We discuss a manufacturing newsvendor problem with nonlinear production costs. We perform comparative statics with respect to the unit revenue, the production cost function and the demand distribution. We provide several specific examples. Then we analyse inventory pooling between manufacturing newsvendors with nonlinear production costs, which involves comparing joint production to individual production. We illustrate the findings by using examples with demands following i.i.d. uniform and normal distributions.

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“…However, for general demand distributions and store specific holding and penalty costs there might not be any savings from centralization. Conditions on demand distributions are discussed in Chen & Lin (1989) and on holding and penalty costs in Hartman & Dror (2005). Gerchak & Gupta (1991) investigate a newsvendor game in which each retailer is a newsvendor with identical cost structures and the transportation cost associated with reallocating inventory after observing the demand is ignored.…”

Section: Newsvendor Gamesmentioning

confidence: 99%