This paper considers the stock rationing problem of a single-item, make-to-stock production system with several demand classes and lost sales. For the case of Poisson demands and exponential production times, we show that the optimal policy can be characterized by a sequence of monotone stock rationing levels. For each demand class, there exists a stock rationing level at or below which it is optimal to start rejecting the demand of this class in anticipation of future arrival of higher priority demands. A simple queueing model is analyzed to compute the operating cost of a rationing policy. In a numerical study, we compare the optimal rationing policy with a first-come first-served policy to investigate the benefit of stock rationing under different operating conditions of the system.inventory/production, inventory rationing, dynamic programming/optimal control, applications

We study a supply chain with manufacturer encroachment in which product quality is endogenous and customers have heterogeneous preferences for quality. It is known that, when quality is exogenous, encroachment could make the retailer better-off. Yet when quality is endogenous and the manufacturer has enough flexibility in adjusting quality, we find that encroachment always makes the retailer worse-off in a large variety of scenarios. We also establish that, while a higher manufacturer's cost of quality hurts the retailer in absence of encroachment, it could benefit the retailer with encroachment. In addition, we show that a manufacturer offering differentiated products through two channels prefers to sell its high-quality product through the direct channel. Contrary to conventional wisdom, quality differentiation does not always benefit either manufacturer or retailer. Our results may explain why, despite extant theoretical predictions, retailers almost always resent encroachment. These findings also suggest that firms must be cautious when adopting quality differentiation as a strategy to ease channel conflict caused by encroachment.

We investigate contracting and information sharing in two competing supply chains, each consisting of one manufacturer and one retailer. The two supply chains are identical, except they may have different investment costs for information sharing. The problem is studied using a two-stage game. In the first stage, the manufacturers decide whether to invest in information sharing. In the second stage, given the information structure created in the first stage, the manufacturers offer contracts to their retailers and the retailers engage in Cournot competition. We analyze the game for two different contract types. For the case of contract menus, a supply chain that does not have information sharing will lower its selling quantities because of the negative quantity distortions in the contract menus, thus creating a strategic disadvantage in Cournot competition. The value of information sharing to a supply chain is positive, and the dominant strategy of each supply chain is to invest in information sharing when the investment costs are low. We fully characterize the equilibrium information sharing decisions under different investment costs. For the case of linear price contracts, the value of information sharing to a supply chain becomes negative, and the dominant strategy of each supply chain is not to invest in information sharing regardless of investment costs. Our results highlight the importance of contract type as a driver of the value of information sharing and the role of information sharing capability as a source of competitive advantage under supply chain competition.supply chain competition, incentive contracts, asymmetric information, information sharing