Decision, Operations & Information Technologies

Permanent URI for this communityhttp://hdl.handle.net/1903/2230

Prior to January 4, 2009, this unit was named Decision & Information Technologies.

Browse

Author: search.filters.author.Ferguson, Mark

Search Results

Now showing 1 - 2 of 2
  • Thumbnail Image
    Item
    Note: An Application of the EOQ Model with Nonlinear Holding Cost to Inventory Management of Perishables
    (2005-07-19T20:53:40Z) Souza, Gilvan; Ferguson, Mark; Jayaraman, Vaidy
    We consider a variation of the economic order quantity (EOQ) model where cumulative holding cost is a nonlinear function of time. This problem has been studied by Weiss (1982), and we here show how it is an approximation of the optimal order quantity for perishable goods, such as milk, and produce, sold in small to medium size grocery stores where there are delivery surcharges due to infrequent ordering, and managers frequently utilize markdowns to stabilize demand as the product’s expiration date nears. We show how the holding cost curve parameters can be estimated via a regression approach from the product’s usual holding cost (storage plus capital costs), lifetime, and markdown policy. We show in a numerical study that the model provides significant improvement in cost vis-à-vis the classic EOQ model, with a median improvement of 40%. This improvement is more significant for higher daily demand rate, lower holding cost, shorter lifetime, and a markdown policy with steeper discounts.
  • Thumbnail Image
    Item
    Supply Chain Coordination for False Failure Returns
    (2005-04-11T13:17:49Z) Souza, Gilvan; Ferguson, Mark; Guide, V. Daniel, Jr.
    False failure returns are products that are returned by consumers to retailers with no functional or cosmetic defect. The cost of a false failure return includes the processing actions of testing, refurbishing if necessary, repackaging, the loss in value during the time the product spends in the reverse supply chain (a time that can exceed several months for many firms), and the loss in revenue because the product is sold at a discounted price. This cost is significant, and is incurred primarily by the manufacturer. Reducing false failure returns, however, requires effort primarily by the retailer, for example informing consumers about the exact product that best fits their needs. We address the problem of reducing false failure returns via supply chain coordination methods. Specifically, we propose a target rebate contract that pays the retailer a specific dollar amount per each unit of false failure returns below a target. This target rebate provides an incentive to the retailer to increase her effort, thus decreasing the number of false failures and (potentially) increasing net sales. We show that this contract is Pareto–improving in the majority of cases. Our results also indicate that the profit improvement to both parties, and the supply chain, is substantial.