Prof. Lucy Gongtao Chen
National University of Singapore
Talk:
Managing Operational and Financing Decisions to Meet Targets
Abstract:
In this study we investigate the impact of a target on firms' operational (in particular, inventory) and financing decisions. Different than the existing approach that maximizes the probability of the profit reaching targets, we model the effect of targets by optimizing a new target-oriented decision criterion. We first discuss a single-period (newsvendor) problem and highlight some interesting theoretical results, which happen to be consistent with existing findings in newsvendor experiments. In the multi-period problem, we incorporate the financing (lending and borrowing) decisions to smooth out consumptions over time with the goal of achieving some prescribed consumption targets. We show that if borrowing and lending are unrestricted, the optimal financing policy of the criterion is to finance consumptions at the target levels for all periods except the last one. Moreover, the optimal inventory policy preserves the structure of base-stock policy (without fixed-cost case) or (s,S) policy (with fixed-cost case), and could be achieved with relatively modest computational effort. Under restricted financing, we show that the optimal policies correspond to those that maximize expected additive-exponential utilities, and can be obtained by an efficient algorithm. Our numerical study reports favorable computational results for using targets to regulate uncertain consumptions over time.
Biography:
Dr Lucy Gongtao Chen is an Associate Professor in the Department of Analytics & Operations at NUS Business School. Her research is mainly in the areas of inventory management, supply chain management, and the interface between operations and marketing. Her work is published in journals such as Management Science, Operations Research, Manufacturing & Service Operations Management, Production and Operations Management, and Journal of Operations Management. She is also frequently invited to present in seminars and workshops. She is a member of several professional associations and has served as a session Chair and organiser for various global conferences. Dr Chen completed her Masters of Science and PhD in Operations Management at Johnson School of Management at the Cornell University.
