IDEAS home Printed from https://ideas.repec.org/a/eee/transe/v60y2013icp27-38.html
   My bibliography  Save this article

The value of information on supply risk under random yields

Author

Listed:
  • Cheong, Taesu
  • Song, Sang Hwa

Abstract

For companies facing challenge of managing unreliable supply sources, one of the operational goals is to increase the overall profit by improving performance of uncertain supply. We here develop stochastic decision frameworks which evaluate necessary information about uncertainties and help newsvendor and suppliers to enhance supply reliability. We first analyze the newsvendor’s purchasing decision under supply uncertainty and the derived decision framework is used to identify stochastic dominance conditions. We found that partial supply risk information is sufficient to determine regular ordering quantity, but to improve the overall profit, it is important to gather more information about stochastic dominance conditions.

Suggested Citation

  • Cheong, Taesu & Song, Sang Hwa, 2013. "The value of information on supply risk under random yields," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 60(C), pages 27-38.
  • Handle: RePEc:eee:transe:v:60:y:2013:i:c:p:27-38
    DOI: 10.1016/j.tre.2013.09.006
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1366554513001609
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Volodymyr Babich & Apostolos N. Burnetas & Peter H. Ritchken, 2007. "Competition and Diversification Effects in Supply Chains with Supplier Default Risk," Manufacturing & Service Operations Management, INFORMS, vol. 9(2), pages 123-146, October.
    2. Jiri Chod & Nils Rudi & Jan A. Van Mieghem, 2010. "Operational Flexibility and Financial Hedging: Complements or Substitutes?," Management Science, INFORMS, vol. 56(6), pages 1030-1045, June.
    3. Yunzeng Wang & Yigal Gerchak, 1996. "Periodic Review Production Models with Variable Capacity, Random Yield, and Uncertain Demand," Management Science, INFORMS, vol. 42(1), pages 130-137, January.
    4. Brian Tomlin, 2006. "On the Value of Mitigation and Contingency Strategies for Managing Supply Chain Disruption Risks," Management Science, INFORMS, vol. 52(5), pages 639-657, May.
    5. He, Yuanjie & Zhang, Jiang, 2008. "Random yield risk sharing in a two-level supply chain," International Journal of Production Economics, Elsevier, vol. 112(2), pages 769-781, April.
    6. He, Yuanjie & Zhang, Jiang, 2010. "Random yield supply chain with a yield dependent secondary market," European Journal of Operational Research, Elsevier, vol. 206(1), pages 221-230, October.
    7. Sawik, Tadeusz, 2011. "Selection of supply portfolio under disruption risks," Omega, Elsevier, vol. 39(2), pages 194-208, April.
    8. Schmitt, Amanda J. & Snyder, Lawrence V. & Shen, Zuo-Jun Max, 2010. "Inventory systems with stochastic demand and supply: Properties and approximations," European Journal of Operational Research, Elsevier, vol. 206(2), pages 313-328, October.
    9. Harrison, J. Michael & Van Mieghem, Jan A., 1999. "Multi-resource investment strategies: Operational hedging under demand uncertainty," European Journal of Operational Research, Elsevier, vol. 113(1), pages 17-29, February.
    10. Frank W. Ciarallo & Ramakrishna Akella & Thomas E. Morton, 1994. "A Periodic Review, Production Planning Model with Uncertain Capacity and Uncertain Demand---Optimality of Extended Myopic Policies," Management Science, INFORMS, vol. 40(3), pages 320-332, March.
    11. Maqbool Dada & Nicholas C. Petruzzi & Leroy B. Schwarz, 2007. "A Newsvendor's Procurement Problem when Suppliers Are Unreliable," Manufacturing & Service Operations Management, INFORMS, vol. 9(1), pages 9-32, August.
    12. Vishal Gaur & Sridhar Seshadri, 2005. "Hedging Inventory Risk Through Market Instruments," Manufacturing & Service Operations Management, INFORMS, vol. 7(2), pages 103-120, April.
    13. Yimin Wang & Wendell Gilland & Brian Tomlin, 2010. "Mitigating Supply Risk: Dual Sourcing or Process Improvement?," Manufacturing & Service Operations Management, INFORMS, vol. 12(3), pages 489-510, September.
    14. William L. Cooper & Diwakar Gupta, 2006. "Stochastic Comparisons in Airline Revenue Management," Manufacturing & Service Operations Management, INFORMS, vol. 8(3), pages 221-234, February.
    15. Gullu, Refik, 1998. "Base stock policies for production/inventory problems with uncertain capacity levels," European Journal of Operational Research, Elsevier, vol. 105(1), pages 43-51, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ju, Wanrong & Gabor, Adriana F. & van Ommeren, J.C.W., 2015. "An approximate policy for a dual-sourcing inventory model with positive lead times and binomial yield," European Journal of Operational Research, Elsevier, vol. 244(2), pages 490-497.
    2. repec:eee:transe:v:110:y:2018:i:c:p:31-46 is not listed on IDEAS
    3. repec:eee:transe:v:106:y:2017:i:c:p:20-44 is not listed on IDEAS
    4. Xue, Weili & Choi, Tsan-Ming & Ma, Lijun, 2016. "Diversification strategy with random yield suppliers for a mean–variance risk-sensitive manufacturer," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 90(C), pages 90-107.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:transe:v:60:y:2013:i:c:p:27-38. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/600244/description#description .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.