Prof. J. George Shanthikumar
Purdue University
Talk:
Dynamic Supply Contracts When the Supplier’s Production Capacity is Uncertain
Abstract:
We study the effect of upstream supply capacity uncertainty on the inventory decisions in a two-stage supply chain. In each period, the retailer places an order to the supplier aiming to meet an uncertain demand. The supplier in turn issues a production order and obtains an output that is capped by his capacity. When both retail order and production order are determined by a central controller, the optimal policy intends to meet the retail order via sufficient production. When the decisions are decentralized, however, the supplier may choose to underproduce. We show that simple contracts (such as, wholesale price, two-part tariff, and revenue sharing contracts), though allowing coordination between the supplier and the retailer in the single-period setting, fail to do so in the dynamic setting. We identify transfer payment function under which coordination is achieved when both party operates with complete information about each other. Furthermore, we discuss the mechanism to dynamically coordinate the supplier’s and retailer’s decisions when they each possess private information. (This is a joint work with Qi Annabelle Feng and Zhongjie Ma) Biography:Professor Shanthikumar joined the Krannert faculty in 2009. Prior to coming to Purdue, he was a Chancellor's Professor of Industrial Engineering and Operations Research at the University of California, Berkeley. His research interests are in integrated interdisciplinary decision making, model uncertainty and learning, production systems modeling and analysis, queueing theory, reliability, scheduling, semiconductor yield management, simulation stochastic processes, and sustainable supply chain management. He has written or co-written more than 250 papers on these topics. He is a co-author (with John A. Buzacott) of the book Stochastic Models of Manufacturing Systems and a co-author (with Moshe Shaked) of the books Stochastic Orders and Their Applications. He was a co-editor of Flexible Services & Manufacturing Journal and is (or was) a member of the editorial boards of the Asia-Pacific Journal of Operations Research, IEEE Transactions on Automation Sciences and Engineering, IIE Transactions, International Journal of Flexible Management Systems, Journal of Discrete Event Dynamic Systems, Journal of the Production and Operations Management Society, Operations Research, Operations Research Letters, OPSEARCH, Probability in the Engineering and Information Sciences, and Queueing Systems: Theory and Applications. Dr. Shanthikumar developed a data-driven production planning tool for Intel. Through this data-driven model, he discovered several shop-floor level coordination between manufacturing and maintenance, which helped to significantly improve the working process performance. This study also led to a new theory in stochastic models that inspires a new stream of academic research.
