Production and Operations Management, May 12, 2016
Managers at all stages of a supply chain are concerned about meeting profit targets. We study con... more Managers at all stages of a supply chain are concerned about meeting profit targets. We study contract design for a buyer–supplier supply chain, with each party maximizing expected profit subject to a chance constraint on meeting his respective profit target. We derive the optimal contract form (across all contract types) with randomized and deterministic payments. The best contract has the property that, if the chance constraints are binding, at most one party fails to satisfy his profit target for any given demand realization. This implies that “least risk sharing,”that is, minimizing the probability of outcomes for which both parties fail to achieve their profit targets, is optimal, contrary to the usual expectations of “risk sharing.” We show that an optimal contract can possess only two of the following three properties simultaneously: (i) supply chain coordination, (ii) truth-telling, and (iii) non-randomized payments. We discuss methods to mitigate the consequent implementation challenges. We also derive the optimal contract form when chance constraints are incorporated into several simpler and easier-to-implement contracts. From a numerical study, we find that an incremental returns contract (in which the marginal rebate rate depends on the return quantity) performs quite well across a relatively broad range of conditions.
We investigate the problem of determining lot sizes for multiple items when the expected percenta... more We investigate the problem of determining lot sizes for multiple items when the expected percentage of acceptable output increases with the duration of the production run, usually due to adjustments made during the early part of the production run. Such problems arise in metal stamping, textile finishing processes, and a variety of other industries. The goal is to minimize the total cost of production, inventory holding costs, and setup costs (where applicable). We develop a heuristic procedure based on a Lagrangian relaxation that differs from relaxations used in earlier studies. We use various properties of the objective function to guide the adjustment of the initial solution from the relaxation toward feasibility. Computational results indicate that, on the average, the heuristic produces solutions within 4.9% of the lower bound obtained from the Lagrangian relaxation.
We study a single-item, periodic-review inventory system with stochastic demand, arbitary deliver... more We study a single-item, periodic-review inventory system with stochastic demand, arbitary delivery lead times and all-or-nothing production yields: whenever a shipment (of an order) arrives, the firm conducts a sample test to confirm the quality; if the sample test fails, the entire shipment is returned or destroyed. Although the problem is impossible to solve exactly except in special cases, we utilize properties of the problem to develop a heuristic that, in numerical tests, performs well in comparison to a popular heuristic and in comparison to the optimal policy.
We investigate the product cycling problem (also known as the common cycle scheduling problem) wh... more We investigate the product cycling problem (also known as the common cycle scheduling problem) when there are economies of scale due to increasing yield rates. Increasing yield rates are characteristic of production processes in which the percentage of acceptable parts ...
International Journal of Production Economics, Nov 1, 1992
We have studied the problem of determining the frequency of production of a single component and ... more We have studied the problem of determining the frequency of production of a single component and the frequency of delivery of that component to a customer which uses this component at a constant rate. The objective is to minimize the average cost per unit time of production setup costs, inventory holding costs at both the supplier and the customer, and transportation costs. The model allows positive production setup times. We prove that the ratio between the production interval and delivery interval must be an integer in an optimal solution. This provides the basis for a very simple, optimal solution procedure. We use these results to characterize situations in which it is optimal to have synchronized production and delivery, and discuss the ramifications of these conditions on strategies for setup cost and setup time reductions.
International Journal of Flexible Manufacturing Systems, Jun 1, 1991
In this article we consider the problem of determining the minimum cost configuration (number of ... more In this article we consider the problem of determining the minimum cost configuration (number of machines and pallets) for a flexible manufacturing system with the constraint of meeting a prespecified throughput, while simultaneously allocating the total workload among the machines (or groups of machines). Our procedure allows consideration of upper and lower bounds on the workload at each machine group. These bounds arise as a consequence of precedence constraints among the various operations and/or limitations on the number or combinations of operations that can be assigned to a machine because of constraints on tool slots or the space required to store assembly components. Earlier work on problems of this nature assumes that the workload allocation is given. For the single-machine-type problem we develop an efficient implicit enumeration procedure that uses fathoming rules to eliminate dominated configurations, and we present computational results. We discuss how this procedure can be used as a building block in solving the problem with multiple machine types.
Production and Operations Management, May 12, 2016
Managers at all stages of a supply chain are concerned about meeting profit targets. We study con... more Managers at all stages of a supply chain are concerned about meeting profit targets. We study contract design for a buyer–supplier supply chain, with each party maximizing expected profit subject to a chance constraint on meeting his respective profit target. We derive the optimal contract form (across all contract types) with randomized and deterministic payments. The best contract has the property that, if the chance constraints are binding, at most one party fails to satisfy his profit target for any given demand realization. This implies that “least risk sharing,”that is, minimizing the probability of outcomes for which both parties fail to achieve their profit targets, is optimal, contrary to the usual expectations of “risk sharing.” We show that an optimal contract can possess only two of the following three properties simultaneously: (i) supply chain coordination, (ii) truth-telling, and (iii) non-randomized payments. We discuss methods to mitigate the consequent implementation challenges. We also derive the optimal contract form when chance constraints are incorporated into several simpler and easier-to-implement contracts. From a numerical study, we find that an incremental returns contract (in which the marginal rebate rate depends on the return quantity) performs quite well across a relatively broad range of conditions.
We investigate the problem of determining lot sizes for multiple items when the expected percenta... more We investigate the problem of determining lot sizes for multiple items when the expected percentage of acceptable output increases with the duration of the production run, usually due to adjustments made during the early part of the production run. Such problems arise in metal stamping, textile finishing processes, and a variety of other industries. The goal is to minimize the total cost of production, inventory holding costs, and setup costs (where applicable). We develop a heuristic procedure based on a Lagrangian relaxation that differs from relaxations used in earlier studies. We use various properties of the objective function to guide the adjustment of the initial solution from the relaxation toward feasibility. Computational results indicate that, on the average, the heuristic produces solutions within 4.9% of the lower bound obtained from the Lagrangian relaxation.
We study a single-item, periodic-review inventory system with stochastic demand, arbitary deliver... more We study a single-item, periodic-review inventory system with stochastic demand, arbitary delivery lead times and all-or-nothing production yields: whenever a shipment (of an order) arrives, the firm conducts a sample test to confirm the quality; if the sample test fails, the entire shipment is returned or destroyed. Although the problem is impossible to solve exactly except in special cases, we utilize properties of the problem to develop a heuristic that, in numerical tests, performs well in comparison to a popular heuristic and in comparison to the optimal policy.
We investigate the product cycling problem (also known as the common cycle scheduling problem) wh... more We investigate the product cycling problem (also known as the common cycle scheduling problem) when there are economies of scale due to increasing yield rates. Increasing yield rates are characteristic of production processes in which the percentage of acceptable parts ...
International Journal of Production Economics, Nov 1, 1992
We have studied the problem of determining the frequency of production of a single component and ... more We have studied the problem of determining the frequency of production of a single component and the frequency of delivery of that component to a customer which uses this component at a constant rate. The objective is to minimize the average cost per unit time of production setup costs, inventory holding costs at both the supplier and the customer, and transportation costs. The model allows positive production setup times. We prove that the ratio between the production interval and delivery interval must be an integer in an optimal solution. This provides the basis for a very simple, optimal solution procedure. We use these results to characterize situations in which it is optimal to have synchronized production and delivery, and discuss the ramifications of these conditions on strategies for setup cost and setup time reductions.
International Journal of Flexible Manufacturing Systems, Jun 1, 1991
In this article we consider the problem of determining the minimum cost configuration (number of ... more In this article we consider the problem of determining the minimum cost configuration (number of machines and pallets) for a flexible manufacturing system with the constraint of meeting a prespecified throughput, while simultaneously allocating the total workload among the machines (or groups of machines). Our procedure allows consideration of upper and lower bounds on the workload at each machine group. These bounds arise as a consequence of precedence constraints among the various operations and/or limitations on the number or combinations of operations that can be assigned to a machine because of constraints on tool slots or the space required to store assembly components. Earlier work on problems of this nature assumes that the workload allocation is given. For the single-machine-type problem we develop an efficient implicit enumeration procedure that uses fathoming rules to eliminate dominated configurations, and we present computational results. We discuss how this procedure can be used as a building block in solving the problem with multiple machine types.
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Papers by Candace Yano