THESIS
2013
viii, 92 pages : illustrations ; 30 cm
Abstract
This thesis addresses two issues about risk management in ocean transport and manufacturing
decisions, respectively.
In the first essay, we study a retailer (shipper) who transports products from overseas
factories to the destination market via ocean lines in order to satisfy a stochastic demand
during a selling season with markdowns. We first consider two ocean carriers providing
uncertain transit times with the corresponding freight rates. Our models reveal two benefits
of maintaining a carrier portfolio. First, allocating shipments to more than one carrier
spreads the risk of markdown losses. Second, we find that using heterogeneous carriers
can tackle the demand-side uncertainty. As for multiple candidate carriers, the optimal
solution is derived in closed form if transit t...[
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This thesis addresses two issues about risk management in ocean transport and manufacturing
decisions, respectively.
In the first essay, we study a retailer (shipper) who transports products from overseas
factories to the destination market via ocean lines in order to satisfy a stochastic demand
during a selling season with markdowns. We first consider two ocean carriers providing
uncertain transit times with the corresponding freight rates. Our models reveal two benefits
of maintaining a carrier portfolio. First, allocating shipments to more than one carrier
spreads the risk of markdown losses. Second, we find that using heterogeneous carriers
can tackle the demand-side uncertainty. As for multiple candidate carriers, the optimal
solution is derived in closed form if transit time uncertainty is negligible. By numerical
experiments, we demonstrate that a two-carrier portfolio performs quite well, although there
can be multiple carriers selected in the optimal solution.
The second essay studies the inventory competition under yield uncertainty. Two firms
with random yield compete for substitutable demand: If one firm suffers a stockout, which
can be caused by yield failure, its unsatisfied customer may switch to its competitor. We first
study the case in which two competing firms decide order quantities based on the exogenous
reliability levels. The results from the traditional inventory competition are generalized to
the case with yield uncertainty and we find that quantity and reliability can be complementary
instruments in the competition. Further, we allow the firms to endogenously improve
their yield reliability before competing in quantity. Under some conditions, we show that
the reliability game is submodular. Our results indicate that competition in quantity can
discourage reliability improvement.
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