Breadth of range and depth of stock: forecasting and inventory management at Euro Car Parts Ltd.

This paper investigates inventory management issues in a distribution network. The study is motivated by examining the operation of a wholesaling car parts company. Customer service requirements are of paramount importance in this market sector. The nature of the demand facing the company is characterised. The breadth of range of stock keeping units (SKUs) held at a stocking location and the quantity of each SKU held are normally treated in isolation but in this case, the rule developed to select the range of SKU was extended to determine the level of stock to hold. It is intuitively obvious that these two factors should be linked, yet the authors have not found any other literature developing the connection in a practical context. Forecasting issues are explored as the rule on stock range depends on a forecast of the number of orders received for each SKU at each stocking unit. Some implementation issues and extensions are indicated.     

Warehouse location with production,inventory, and distribution decisions: a case study in the lube oil industry

In this paper, a supply chain management problem from a real case study is modeled and solved. A company in Pakistan wanted to outsource part of its warehousing activity to a third party logistics (3PL) provider. Consequently, the company had to decide on where to rent space in the 3PL warehouses. Knowing that such a strategic decision is affected by tactical and operational decisions, the problem is presented as a facility location problem integrating production, inventory, and distribution decisions. The problem is formulated as a mixed integer linear programming model which minimizes the total cost composed of location, distribution, production, and inventory costs. Several constraints specific to the situation and policy of the company were considered. A thorough analysis was done on the results obtained with respect to formulation efficiency, sensitivity analysis, and distribution of costs. In addition to the solution of the company problem, a set of 1215 problem instances was generated by varying five types of relevant costs in a full factorial manner. The solution of the generated problems always suggests to open in the same two locations and the integrality gaps averaged 0.062 % with a maximum of 0.102 %. On average, the major components of the total cost are production cost (96.6 %), transportation costs (2.7 %), and inventory holding costs (0.38 %). The total warehouse opening cost accounted for less than 0.05 % of the total costs.     

Distribution management by means of cutoff order size: a case study

We present a case study on physical distribution management for a production company in Western Europe. The company delivers finished goods both from distribution centres and directly from plants to its customers. The lead time from distribution centres is shorter, but higher costs are involved. The choice for delivery of an individual order is based on the so-called stockmix and cutoff order size. The stockmix is the set of products stocked at the distribution centre, which for efficiency reasons is restricted. Orders smaller than the cutoff order size are delivered from the distribution centre closest to the customer, provided that the product ordered is present in its stockmix. Otherwise they are delivered from the production plant that makes the product. In this paper we develop methods to determine both the stockmix and the cutoff order size for each distribution centre. The objective considered is the minimisation of distribution and handling costs subject to service constraints.     

Optimal risk control and dividend policies under excess of loss reinsurance

We study the optimal reinsurance policy and dividend distribution of an insurance company under excess of loss reinsurance. The objective of the insurer is to maximize the expected discounted dividends. We suppose that in the absence of dividend distribution, the reserve process of the insurance company follows a compound Poisson process. We first prove existence and uniqueness results for this optimization problem by using singular stochastic control methods and the theory of viscosity solutions. We then compute the optimal strategy of reinsurance, the optimal dividend strategy and the value function by solving the associated integro-differential Hamilton–Jacobi–Bellman Variational Inequality numerically.     

Effects of product postponement on the distribution network: a case study

This case study is based on a supply network analysis conducted at 3M Company, a large multi-national company headquartered in Maplewood, Minnesota. The company has developed product colouring technology that enables product postponement. This study focuses on the development of a discrete-event simulation model and inventory management equations to accurately portray the behaviour of the proposed distribution network that supports product postponement capability. The paper describes, in detail, the modelling process in the context of this actual case study. In this study, it is shown that properly devised product postponement strategy allows for best-in-class delivery within a specified lead-time. The reasons for choosing this inventory management practice are discussed. The benefits and drawbacks of product postponement are reviewed in general terms. Simulation as a tool for analysing supply networks is developed and evaluated for its ability to support a data-driven decision process.     

A discrete bilevel brain storm algorithm for solving a sales territory design problem: a case study

A sales territory design problem faced by a manufacturing company that supplies products to a group of customers located in a service region is addressed in this paper. The planning process of designing the territories has the objective to minimizing the total dispersion of the customers without exceeding a limited budget assigned to each territory. Once territories have been determined, a salesperson has to define the day-by-day routes to satisfy the demand of customers. Currently, the company has established a service level policy that aims to minimize total waiting times during the distribution process. Also, each territory is served by a single salesperson. A novel discrete bilevel optimization model for the sales territory design problem is proposed. This problem can be seen as a bilevel problem with a single leader and multiple independent followers, in which the leader’s problem corresponds to the design of territories (manager of the company), and the routing decision for each territory corresponds to each follower. The hierarchical nature of the current company’s decision-making process triggers some particular characteristics of the bilevel model. A brain storm algorithm that exploits these characteristics is proposed to solve the discrete bilevel problem. The main features of the proposed algorithm are that the workload is used to verify the feasibility and to cluster the leader’s solutions. In addition, four discrete mechanisms are used to generate new solutions, and an elite set of solutions is considered to reduce computational cost. This algorithm is used to solve a real case study, and the results are compared against the current solution given by the company. Results show a reduction of more than 20% in the current costs with the solution obtained by the proposed algorithm. Furthermore, a sensitivity analysis is performed, providing interesting managerial insights to improve the current operations of the company.     

Evaluation of the probability of bankruptcy for a model of insurance company

We study the problem of evaluation of the probability of ruin of an insurance company for infinitely many steps in the case where the company can invest its capital to bank deposits at any time. As a distribution of the amounts of claims to the insurance company, we use the gamma-distribution with the parameters n and α. __________ Translated from Ukrains’kyi Matematychnyi Zhurnal, Vol. 59, No. 4, pp. 447–457, April, 2007.     

The assessment of the information quality with the aid of multiple criteria analysis

The virtual business work flow depends on the information quality (IQ) which is essential attribute of information. The IQ depends strongly on organization of the information system (IS) and how the information is processed. In our approach we incorporate the four-aspect representation of IQ: (1) intrinsic, (2) contextual, (3) representational, and (4) accessibility. These four-aspects are divided into several criteria at the next level of hierarchy. The weights, representing the relative importance of criteria, have been assessed by pair-wise comparisons made by group of experts. Based on discussion with experts, six alternative strategies, that could be used for improving the IQ, were designed. For each given criterion, the group of subjects revealed the opinion about the level of achievement of every alternative. The set of scores, assigned to the alternative by different subjects, formed the discrete distribution that is used for a comparison of alternatives with the aid of stochastic dominances. In analogy to the Electre I methodology, the simple algorithm for the aggregate evaluation of analyzed alternatives was proposed. The benefits of proposed approach were demonstrated in a case study of the semiconductor industry. The results of our study suggest, that in case of matured company, the external strategies, that point out to the information exchange and strategic networked alliance with customers and suppliers, are preferred to the internal ones. The latter ones might be of greater importance for the new set up or for a young company.     

Dynamic pricing of electricity in retail markets

This paper aims at defining a dynamic and flexible tariff structure for a distribution company that protects the retail consumers against the excessive fluctuations of the wholesales market prices. We propose a two-stage pricing scheme that sets in a first-stage a time-of-use tariff that is corrected later by a dynamic component once the real-time demand has been observed. A personalized tariff scheme may be offered by a distribution company to each dynamic customer by allowing him to choose the appropriate robustness level expressed in terms of variability between the first and the second-stage decisions. The arising limited recourse model has been tested on realistic test problems, by using a slight modification of a recently proposed interior point solution framework.      

索赔额服从亚指数分布族S~*的破产概率研究

研究了亚指数分布族中一类特殊的分布,在年索赔额服从该特殊分布的假设下,推导出了的终极破产概率的渐进表达式,提出了可以用随机模拟方法对于服从亚指数分布的破产概率进行模拟计算的方法.从实践的角度来说,更具有可操作性,为保险业提供了一些应对极值概率事件的理论依据和检验方法.     

基于微分博弈的二级猪肉供应链质量行为协调机制研究

运用微分博弈方法研究了由单一生猪屠宰加工企业和单一超市构成的二级猪肉供应链质量行为协调机制。首先考察并比较了Nash非合作博弈、Stackelberg主从博弈以及协同合作博弈情形下屠宰加工企业和超市的最优质量行为决策,研究结果表明协同合作决策模式下,屠宰加工企业和超市的质量行为以及猪肉供应链总体利润均严格优于在非合作决策模式下的相应值。然后导出了能够使屠宰加工企业和超市的个体利润达到帕累托最优,进而实现双方质量行为协调的供应链总体利润分配系数的取值范围。     

BOT项目公司的稳定性及股东行为特征研究

将BOT项目公司的股东简化为建设承包商、设备供应商和主要投资人,然后根据假设条件求出了承包商和供应商作假的最优概率,在此基础上的研究表明项目公司的稳定性与作假被查实的罚金密切相关,且当作假的查处成本降低到一定的水平时,项目公司会具有更好的稳定性.在项目公司有三个股东的情况下,股东在意图作假时不会像只有两个股东那样只权衡自己被查实的概率、惩罚的力度和查处自己的成本,同时还会考虑另一股东作假的概率和项目公司股权的分布并且会比较自己作假和另一股东作假的相对收益.最后为投资人建议了一些应对措施.     

基于左截尾g-h分布的船舶溢油损失分布拟合研究

由于船舶溢油损失对保险公司的影响非常大,保险费率厘定过程中对损失分布拟合的研究非常重视.以全国船舶溢油事故损失数据为样本,对船舶溢油损失序列的分布特征进行研究.通过实证研究发现,船舶溢油损失数据不服从正态分布,具有"右偏、尖峰、厚尾"的特性.考虑船舶溢油损失数据的左截尾特性,将左截尾g-h分布引入船舶溢油损失序列的分布拟合中,结果表明,这种分布对船舶溢油损失数据的拟合效果与传统分布相比更好.     

Calibration of a basket option model applied to company valuation

Applying real options thinking to company valuation seems theoretically and intuitively appealing. However, the real option analogy of a single European option as well as the compound option proxy perform poorly when applied to company valuation. We therefore suggest to rework the building blocks of real option applications to corporate valuation.  We introduce a framework to delineate the distribution of the underlying asset in the risk neutral world, which is important in order to value any derivative. This is achieved by an algorithm to calibrate a basket option model using real world data of observed share prices. The fitting takes account of the class of stable distributions. The index of stability of asymmetric α stable distribution serves as an over-all parameter to characterise the specific distribution.     

Queueing network model for a single-operator machine interference problem with external operations

Machine interference is a significant problem in many manufacturing systems. Prior research shows that machine interference may be as high as 10% of machine time. This paper proposes a queueing network model for a single-operator, machine interference problem with external operations, i.e., those tasks that can be completed while the machine is running. The interactions for part/machine and machine/operator are modeled as an open and a closed queueing network, respectively. In the open network, part inter-arrival time follows an exponential distribution. In both networks, service times follow a general distribution that is characterized by their first two moments. An iterative procedure is developed to solve the proposed model. Solution quality is justified by an industry-based case study. Data were collected from the integrated circuit (IC) ink-marking machines of a leading IC packaging company in Taiwan that allowed the construction of an experimental design for computational tests that encompassed a wide range of production scenarios. Empirical results show promise for the proposed methodology in helping to solve industrial problems. Model limitations as well as future research opportunities are discussed.     

Speciality oils supply chain optimization: From a decoupled to an integrated planning approach

We study a problem of tactical planning in a divergent supply chain. It involves decisions regarding production, inventory, internal transportation, sales and distribution to customers. The problem is motivated by the context of a company in the speciality oils industry. The overall objective at tactical level is to maximize contribution and, in order to achieve this, the planning has been divided into two separate problems. The first problem concerns sales where the final sales and distribution planning is decentralized to individual sellers. The second problem concerns production, transportation and inventory planning through refineries, hubs and depots and is managed centrally with the aim of minimizing costs. Due to this decoupling, the solution of the two problems needs to be coordinated in order to achieve the overall objective. In the company, this is pursued through an internal price system aiming at giving the sellers the incentives needed to align their decisions with the overall objective. We propose and discuss linear programming models for the decoupled and integrated planning problems. We present numerical examples to illustrate potential effects of integration and coordination and discuss the advantages and disadvantages of the integrated over the decoupled approach. While the total contribution is higher in the integrated approach, it has also been found that the sellers’ contribution can be considerably lower. Therefore, we also suggest contribution sharing rules to achieve a solution where both the company and the sellers attain a better outcome under the integrated planning.     

The Size and Composition of a Road Transport Fleet

The paper starts with a discussion of the simple fleet size problem. It is shown that this simple problem can be formulated as a linear program.The second part of the paper consists of an actual case study. The fleet concerned is faced with highly seasonal demand which can be met by the firm's own vehicles or by outside hire. There are two types of vehicle, both of which are available in six different sizes. Linear programming was used to find the optimum size and composition of the company fleet. The results, which were substantially implemented, recommended a smaller company fleet and concentration on larger and more flexible vehicles.     

A decision support model for establishing an air taxi service: a case study

Recent availability of relatively cheap small jet aircraft creates opportunities for a new air transport business: Air taxi, an on-demand service in which travellers call in one or a few days in advance to book transportation. In this paper, we present a methodology and simulation study supporting important strategic decisions, like for instance determining the required number of aircraft, for a company planning to establish an air taxi service in Norway. The methodology is based on a module simulating incoming bookings, built around a heuristic for solving the underlying dial-a-flight problem. The heuristic includes a separate method for solving the important subproblem of determining the best distribution of waiting time along a single aircraft schedule. The methodology has proved to provide reliable decision support to the company.     

Optimization-based Distribution Planning for Consumer Electronic Items

This paper describes the application of network modeling and optimization for short-term distribution planning in an Indian electronica firm. The company has three production centres, each comprising several factories. Each day, it ships finished product from the three production centres to 23 distribution centres (namely, its branches and sub-branches) spread all over the country. The present problem may be stated as: given the planned production quantity at each production centre and the estimated demand at each distribution centre for each week of a given month, specify the quantities to be dispatched from each production centre to the various distribution centres in each week of the month. The problem is modelled as a multi-period, minimum-cost, network flow model for each product item. The paper also discusses the implementation and actual use of the model for monthly distribution planning at the company.     

The maximum capture problem with random utilities: Problem formulation and algorithms

A model for the optimal location of new facilities in a competitive market is introduced under the hypothesis that customers' behavior can be modeled by random utility functions. It means that the company, that wished to locate, uses a random utility model to forecast the market share of a location. Therefore the company cannot forecast the behavior of every customer in a deterministic fashion, but is able to embed him by a probability distribution. Three formulations are proposed to compute upper bounds of the objective function and compared in a numerical simulation. A branch and bound method is developed and tested on examples with up to 50 potential locations, and a Variable Neighborhood Search heuristic is proposed to solve larger instances.