Dual sourcing under heavy-tailed demand: An extreme value theory approach

International Journal of Production Research

Volumn 53, Issue 16, 2015, Pages 4979-4992

  Biçer, Işik ^a  

^a EPFL   (Switzerland)

Author keywords

dual sourcing; extreme value theory; heavy tailed distribution

Indexed keywords

COSTS; SALES;

CAPACITY RESERVATION; DEMAND DISTRIBUTION; DEMAND UNCERTAINTY; DUAL SOURCING; EXTREME VALUE THEORY; HEAVY-TAILED DISTRIBUTION; LOW COST SUPPLIERS; OPTIMAL ORDERING;

SUPPLY CHAINS;

EID: 84932194371     PISSN: 00207543     EISSN: 1366588X     Source Type: Journal    
DOI: 10.1080/00207543.2015.1008111     Document Type: Article

References (51)

1. Allon, G., and J. A. Van Mieghem. 2010. "Global Dual Sourcing: Tailored Base-surge Allocation to Near- and Offshore Production." Management Science 56 (1): 110-124.
2. Anderson, C. 2004. "The Long Tail." Wired magazine 12 (10): 170-177.
3. Anderson, C. 2009. The Longer Long Tail: How Endless Choice is Creating Unlimited Demand. New York: Random House Business.
4. Anderson, E. T., G. J. Fitzsimons, and D. Simester. 2006. "Measuring and Mitigating the Costs of Stockouts." Management Science 52 (11): 1751-1763.
5. Avanzi, B., I. Bicer, S. De Treville, and L. Trigeorgis. 2013. "Real Options at the Interface of Finance and Operations: Exploiting Embedded Supply-chain Real Options to Gain Competitiveness." The European Journal of Finance 19 (7-8): 760-778.
6. Aydi{dotless}n, B., K. Guler, and E. Kayi{dotless}ş. 2012. "A Copula Approach to Inventory Pooling Problems with Newsvendor Products." Chap 3. In Handbook of Newsvendor Problems, edited by C. Tsan-Ming, 81-101. New York: Springer.
7. Balakrishnan, A., M. S. Pangburn, and E. Stavrulaki. 2008. "Integrating the Promotional and Service Roles of Retail Inventories." Manufacturing & Service Operations Management 10 (2): 218-235.
8. Bashyam, S., and M. C. Fu. 1998. "Optimization of (s, S) Inventory Systems with Random Lead Times and a Service Level Constraint." Management Science 44 (12-part-2): S243-S256.
9. Bassok, Y., and R. Anupindi. 1997. "Analysis of Supply Contracts with Total Minimum Commitment." IIE Transactions 29 (5): 373-381.
10. Bicer, I., S. De Treville, and V. Hagspiel. 2014. "The Value of Reducing Lead Time Under Non-stationary Demand." Working Paper, University of Lausanne.
11. Bicer, I., and V. Hagspiel. 2014. "Valuing Quantity Flexibility Under Supply-chain Disintermediation Risk." Working Paper, University of Lausanne.
12. Bimpikis, K., and M. G. Markakis. 2014. "Inventory Pooling under Heavy-tailed Demand."Working Paper, Stanford University.
13. Boyaci, T., and Ö. Özer. 2010. "Information Acquisition for Capacity Planning Via Pricing and Advance Selling: When to Stop and Act?" Operations Research 58 (5): 1328-1349.
14. Bradley, J. R. 2004. "A Brownian Approximation of a Production-inventory System with a Manufacturer that Subcontracts." Operations Research 52 (5): 765-784.
15. Brynjolfsson, E., H. J. Yu, and D. Simester. 2011. "Goodbye Pareto Principle, Hello Long Tail: The Effect of Search Costs on the Concentration of Product Sales." Management Science 57 (8): 1373-1386.
16. Brynjolfsson, E., Y. J. Hu, and M. D. Smith. 2006. "From Niches to Riches: Anatomy of the Long Tail." Sloan Management Review 47 (4): 67-71.
17. Cachon, G., K. Cattani, and S. Netessine. 2007. Where in the World is Timbuk2. Philadelphia, PA: Teaching Case, The Wharton School, University of Pennsylvania.
18. Cachon, G., and C. Terwiesch. 2009. Matching Supply with Demand. 2nd ed. Singapore: McGraw-Hill.
19. Cattani, K. D., E. Dahan, and G. M. Schmidt. 2008. "Tailored Capacity: Speculative and Reactive Fabrication of Fashion Goods." International Journal of Production Economics 114 (2): 416-430.
20. Cattani, K. D., E. Dahan, and G. M. Schmidt. 2010. "Lowest Cost May Not Lower Total Cost: Using "Spackling" to Smooth Masscustomized Production." Production and Operations Management 19 (5): 531-545.
21. Chavez-Demoulin, V., P. Embrechts, and J. Nešlehová. 2006. "Quantitative Models for Operational Risk: Extremes, Dependence and Aggregation." Journal of Banking & Finance 30 (10): 2635-2658.
22. Coles, S. 2001. An Introduction to Statistical Modeling of Extreme Values. London: Springer.
23. De Treville, S., I. Bicer, V. Chavez-Demoulin, V. Hagspiel, N. Schurhoff, C. Tasserit, and S. Wager. 2014a. "Valuing Lead Time." Journal of Operations Management 32 (6): 337-346.
24. De Treville, S., N. Schurhoff, L. Trigeorgis, and B. Avanzi. 2014b. "Optimal Sourcing and Lead-time Reduction under Evolutionary Demand Risk." Production and Operations Management 23 (12): 2103-2117.
25. Fisher, M., and A. Raman. 1996. "Reducing the Cost of Demand Uncertainty Through Accurate Response to Early Sales." Operations Research 44 (1): 87-99.
26. Fitzsimons, G. J. 2000. "Consumer Response to Stockouts." Journal of Consumer Research 27 (2): 249-266.
27. Gallego, G., K. Katircioglu, and B. Ramachandran. 2007. "Inventory Management Under Highly Uncertain Demand." Operations Research Letters 35 (3): 281-289.
28. Glock, C. H. 2012. "AComparison of Alternative Delivery Structures in a Dual Sourcing Environment." International Journal of Production Research 50 (11): 3095-3114.
29. Glock, C. H., and J. M. Ries. 2013. "Reducing Lead Time Risk Through Multiple Sourcing: The Case of Stochastic Demand and Variable Lead Time." International Journal of Production Research 51 (1): 43-56.
30. Graves, S. C., D. B. Kletter, and W. B. Hetzel. 1998. "A Dynamic Model for Requirements Planning with Application to Supply Chain Optimization." Operations Research 46 (3): S35-S49.
31. Hausman, W. H. 1969. "Sequential Decision Problems:AModel to Exploit Existing Forecasters." Management Science 16 (2): B93-B111.
32. Heath, D. C., and P. L. Jackson. 1994. "Modeling the Evolution of Demand Forecasts ith Application to Safety Stock Analysis in Production/Distribution Systems." IIE Transactions 26 (3): 17-30.
33. Jarrow, R., and A. Rudd. 1982. "Approximate Option Valuation for Arbitrary Stochastic Processes." Journal of financial Economics 10 (3): 347-369.
34. Klosterhalfen, S., G. Kiesmüller, and S. Minner. 2011. "A Comparison of the Constant-order and Dual-index Policy for Dual Sourcing." International Journal of Production Economics 133 (1): 302-311.
35. Lau, A. H.-L., and H.-S. Lau. 1998. "Decision Models for Single-period Products with Two Ordering Opportunities." International Journal of Production Economics 55 (1): 57-70.
36. Lee, H., and S. Whang. 1999. "Decentralized Multi-echelon Supply Chains: Incentives and Information." Management Science 45 (5): 633-640.
37. Markose, S., and A. Alentorn. 2011. "The Generalized Extreme Value Distribution, Implied Tail Index, and Option Pricing." The Journal of Derivatives 18 (3): 35-60.
38. Milner, J. M., and P. Kouvelis. 2005. "Order Quantity and Timing Flexibility in Supply Chains: The Role of Demand Characteristics." Management Science 51 (6): 970-985.
39. Minner, S. 2003. "Multiple-supplier Inventory Models in Supply Chain Management: A Review." International Journal of Production Economics 81: 265-279.
40. Oestreicher-Singer, G., and A. Sundararajan. 2012. "Recommendation Networks and the Long Tail of Electronic Commerce." MISQuarterly 36 (1): 65-83.
41. Reimann, M. 2011. "Speculative Production and Anticipative Reservation of Reactive Capacity by aMulti-product Newsvendor." European Journal of Operational Research 211 (1): 35-46.
42. Satariano, A. 2014. "Apple Wooed by Arizona as Obama Seeks US Jobs Comeback." Bloomberg. http://www.bloomberg.com/news/2014-02-10/apple-wooed-by-arizona-as-obama-seeks-u-s-jobs-comeback.html
43. Seifert, R. W., U. W. Thonemann, and W. H. Hausman. 2004. "Optimal Procurement Strategies for Online Spot Markets." European Journal of Operational Research 152 (3): 781-799.
44. Serel, D. A., M. Dada, and H. Moskowitz. 2001. "Sourcing Decisions with Capacity Reservation Contracts." European Journal of Operational Research 131 (3): 635-648.
45. Sheopuri, A., G. Janakiraman, and S. Seshadri. 2010. "New Policies for the Stochastic Inventory Control Problem with Two Supply Sources." Operations Research 58 (3): 734-745.
46. Sting, F. J., and A. Huchzermeier. 2010. "Ensuring Responsive Capacity: How to Contract with Backup Suppliers." European Journal of Operational Research 207 (2): 725-735.
47. Su, X., and F. Zhang. 2009. "On the Value of Commitment and Availability Guarantees When Selling to Strategic Consumers." Management Science 55 (5): 713-726.
48. Tsay, A. A. 1999. "The Quantity Flexibility Contract and Supplier-Customer Incentives." Management Science 45 (10): 1339-1358.
49. Veeraraghavan, S., and A. Scheller-Wolf. 2008. "Now or Later: A Simple Policy for Effective Dual Sourcing in Capacitated Systems." Operations Research 56 (4): 850-864.
50. Warburton, R. D., and R. Stratton. 2005. "The Optimal Quantity of Quick Response Manufacturing for an Onshore and Offshore Sourcing Model." International Journal of Logistics: Research and Applications 8 (2): 125-141.
51. Yazlali, Ö., and F. Erhun. 2007. "Relating the Multiple Supply Problem to Quantity Flexibility Contracts." Operations Research Letters 35 (6): 767-772.