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Trading reserved capacity independently among supply chains

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  • Hung, Yick-Hin
  • Li, Leon Y.O.
  • Cheng, T.C.E.
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    Abstract

    We propose a novel mechanism for pooling the reserved capacity (super capacity) of different supply chains, so that they can more effectively match their single-period inventory supplies with their demands. Through this mechanism, retailers can buy or sell unutilized super capacity independently as a commodity in a sub-industry before and during the selling season, which helps improve supply flexibility and increase the utilization of suppliers' reserved capacity. Our findings provide a new channel coordination strategy for a group of supply chains to hedge against capacity and inventory risks by trading super capacity with their competitors, which yields individual and aggregate benefits.

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    Bibliographic Info

    Article provided by Elsevier in its journal International Journal of Production Economics.

    Volume (Year): 133 (2011)
    Issue (Month): 1 (September)
    Pages: 105-112

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    Handle: RePEc:eee:proeco:v:133:y:2011:i:1:p:105-112

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    Web page: http://www.elsevier.com/locate/ijpe

    Related research

    Keywords: Super capacity Alternative inventory Co-opetition game;

    References

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    1. Nils Rudi & Sandeep Kapur & David F. Pyke, 2001. "A Two-Location Inventory Model with Transshipment and Local Decision Making," Management Science, INFORMS, vol. 47(12), pages 1668-1680, December.
    2. Mostard, Julien & de Koster, Rene & Teunter, Ruud, 2005. "The distribution-free newsboy problem with resalable returns," International Journal of Production Economics, Elsevier, vol. 97(3), pages 329-342, September.
    3. Greys Soši\'{c}, 2006. "Transshipment of Inventories Among Retailers: Myopic vs. Farsighted Stability," Management Science, INFORMS, vol. 52(10), pages 1493-1508, October.
    4. Jin, Mingzhou & David Wu, S., 2007. "Capacity reservation contracts for high-tech industry," European Journal of Operational Research, Elsevier, vol. 176(3), pages 1659-1677, February.
    5. Mostard, Julien & Teunter, Ruud, 2006. "The newsboy problem with resalable returns: A single period model and case study," European Journal of Operational Research, Elsevier, vol. 169(1), pages 81-96, February.
    6. Ozen, U. & Fransoo, J. & Norde, H.W. & Slikker, M., 2004. "Cooperation between Multiple Newsvendors with Warehouses," Discussion Paper 2004-34, Tilburg University, Center for Economic Research.
    7. Vlachos, D. & Dekker, R., 2000. "Return handling options and order quantities for single period products," Econometric Institute Research Papers EI 2000-29/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    8. Zou, Li & Dresner, Martin & Windle, Robert, 2010. "A two-location inventory model with transshipments in a competitive environment," International Journal of Production Economics, Elsevier, vol. 125(2), pages 235-250, June.
    9. Karen L. Donohue, 2000. "Efficient Supply Contracts for Fashion Goods with Forecast Updating and Two Production Modes," Management Science, INFORMS, vol. 46(11), pages 1397-1411, November.
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    11. Apostolos Burnetas & Peter Ritchken, 2005. "Option Pricing with Downward-Sloping Demand Curves: The Case of Supply Chain Options," Management Science, INFORMS, vol. 51(4), pages 566-580, April.
    12. Xinxin Hu & Izak Duenyas & Roman Kapuscinski, 2007. "Existence of Coordinating Transshipment Prices in a Two-Location Inventory Model," Management Science, INFORMS, vol. 53(8), pages 1289-1302, August.
    13. Lingxiu Dong & Nils Rudi, 2004. "Who Benefits from Transshipment? Exogenous vs. Endogenous Wholesale Prices," Management Science, INFORMS, vol. 50(5), pages 645-657, May.
    14. Slikker, Marco & Fransoo, Jan & Wouters, Marc, 2005. "Cooperation between multiple news-vendors with transshipments," European Journal of Operational Research, Elsevier, vol. 167(2), pages 370-380, December.
    15. Wang, Xiaolong & Liu, Liwen, 2007. "Coordination in a retailer-led supply chain through option contract," International Journal of Production Economics, Elsevier, vol. 110(1-2), pages 115-127, October.
    16. Li, Jianli & Liu, Liwen, 2008. "Supply chain coordination with manufacturer's limited reserve capacity: An extended newsboy problem," International Journal of Production Economics, Elsevier, vol. 112(2), pages 860-868, April.
    17. Ravi Anupindi & Yehuda Bassok & Eitan Zemel, 2001. "A General Framework for the Study of Decentralized Distribution Systems," Manufacturing & Service Operations Management, INFORMS, vol. 3(4), pages 349-368, February.
    18. Jan A. Van Mieghem, 2003. "Commissioned Paper: Capacity Management, Investment, and Hedging: Review and Recent Developments," Manufacturing & Service Operations Management, INFORMS, vol. 5(4), pages 269-302, July.
    19. Gérard P. Cachon & Martin A. Lariviere, 2001. "Contracting to Assure Supply: How to Share Demand Forecasts in a Supply Chain," Management Science, INFORMS, vol. 47(5), pages 629-646, May.
    20. Silver, Edward A. & Jain, Karuna, 1994. "Some ideas regarding reserving supplier capacity and selecting replenishment quantities in a project context," International Journal of Production Economics, Elsevier, vol. 35(1-3), pages 177-182, June.
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    Cited by:
    1. Hung, Yick-Hin & Li, Leon Y.O. & Cheng, T.C.E., 2013. "Transfer of newsvendor inventory and supply risks to sub-industry and the public by financial instruments," International Journal of Production Economics, Elsevier, vol. 143(2), pages 567-573.

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