The thesis focuses on two important practises in supply chain management, postponement and product perishability....[ Read more ]

The thesis focuses on two important practises in supply chain management, postponement and product perishability.

In the first essay, we consider a retailer that replenishes its inventory by making a delivery request without specifying order quantity, then deciding the quantity when the delivery vehicle arrives after one period. A fixed cost is incurred whenever a delivery request is made. The new feature of this research is the postponement of ordering until one-period demand information is observed. We show that the optimal policy for delivery requests is of a threshold type. The optimal decision on ordering is more complex, there might be multiple order-up-to levels. Numerical studies show that the cost of an ordering policy that considers (at most) two order-up-to levels is close to the minimal, especially when the planning horizon is not too short. We also identify conditions under which a base-stock policy is optimal for ordering. To understand the effects of ordering postponement, we compare our model with the traditional model (Scarf 1960). We show that postponement leads to a lower cost and a higher threshold for making delivery requests.

In the second essay, we consider a supply chain of a supplier and a retailer where the product lifespan is controllable and subject to investment. We derive the optimal order quantity and product lifespan decisions for several decentralized supply chain models, one assumes only the retailer may invest into the product lifespan and the other allows both parties to invest. Our analysis indicates that the investment opportunity creates significant benefits to the entire supply chain. Whenever a party, the retailer or the supplier, chooses to invest into product lifespan, both parties benefit yet her profit share within the supply chain decreases. Other relevant issues such as the impacts on channel coordination and pricing are also investigated.

Keywords: periodic-review inventory systems; optimal policy; postponement; quasi-K-convex; single crossing; dynamic programming; Markov decision programming; Supply chain; Lifespan; Perishable product