Narrow Results

We consider a retailer, facing uncertain supply and price-sensitive stochastic demand, who has to make stocking and pricing decisions for a given selling period. We also consider the case when the demand is price-sensitive deterministic and provide a unified framework for the model with additive errors. For both scenarios, we look at the case when the price is set before receiving the supply, called simultaneous pricing and the case when the price is set after receiving it, which is called postponed pricing. We develop a procedure for finding the optimal policy for the retailer with general distributions for the supply and the demand. To study the effect of supply uncertainty on expected profit, we conduct sensitivity analysis and develop results for both pricing scenarios and give insights. The results have important implications for a retailer in the supply chain, where a portion of the inventory may be lost due to variety of factors including mishandling and failure to meet quality standards. The findings shed light on the nature and role of prices and their relationship to supply and demand.

Cooperative advertising (coop-ad) programs with both accrual rates and participation rates are popularly adopted in practice by manufacturers and retailers to share advertising expenditures. However, results from extant literature show that the accrual rates always negatively impact the manufacturers’ performances, indicating a gap between theory and practice. In this paper, we study a coop-ad program in a distribution channel consisting of a manufacturer and a retailer with risk preferences under demand uncertainty. When both the channel members are risk-neutral, we show that an elaborately specified accrual rate can help reach channel coordination, although the accrual rate always negatively impacts the manufacturer’s performance. When the manufacturer is risk-averse and the retailer is risk-neutral, the accrual rate may positively impact the manufacturer’s performance, and in particular, the manufacturer does prefer a coop-ad program with an accrual rate if his risk-averse level is high and/or the demand volatility is high. When both the channel members are risk-averse, numerical examples illustrate that an accrual rate may benefit both members when the retailer has high profitability and low risk-averse level. These findings, seemingly never reported in the literature, provide plausible explanations for the fact that accrual rates are usually included in coop-ad programs in real-world practice.

In this paper, a production planning problem with inventory and backordering levels is discussed. It is assumed that cumulative demands in periods are uncertain and an interval uncertainty representation with continuous budget is used to model this uncertainty. The robust minmax criterion is applied to compute an optimal production plan. A row and column generation algorithm is constructed for solving the problem. Results of some computational tests are shown which demonstrate that the algorithm is efficient for the instances with up to 100 periods and returns solutions that are robust against the uncertainty in demands.