Many seasonal products are transported via ocean carriers from origin to destination markets. The shipments arriving earlier in the market may sell at higher prices, but faster shipping services can be costly. In this paper, we study a newsvendor-type shipper who transports and sells seasonal products to an overseas market, where the selling price declines over time. A set of vessels with different schedules and freight rates are available to choose from. Our analysis demonstrates that a portfolio of vessels has two distinct effects on mitigating uncertainties in both demand and vessels' arrival schedules, while these two portfolio effects have been previously understood as separate issues in the literature. To find the optimal portfolio in our problem, we first show that when vessels arrive in a deterministic sequence, the optimal portfolio can either be derived in closed form (in the single-demand setting) or computed efficiently with a variation of the shortest-path algorithm (in the multi-demand setting). Then, based on these results, we propose an approximation procedure to address the general problem with an uncertain arrival sequence. In each iteration of the procedure, we only need to minimize a cost function approximated by a deterministic arrival schedule and the portfolio generated can converge to the optimal one under mild conditions. Finally, we present a real-world case study to demonstrate several practical implications of managing a carrier portfolio.

A vertical co-product technology simultaneously produces multiple outputs that differ along a rankable quality metric.Co-product manufacturers often sell products through a distributor. We examine a setting in which a manufacturer sells vertically differentiated co-products through a self-interested distributor to quality-sensitive end customers. The manufacturer determines its production, product line design, and wholesale prices. The distributor determines its purchase quantities and retail prices. In traditional product-line design, products can be produced independently of each other and higher-quality products have higher production costs. This literature established that the length of the product line (i.e., difference between highest and lowest qualities) is greater in an indirect channel than in a direct channel. By contrast, co-products cannot be produced independently of each other. Among other findings, we establish that this interdependency causes the opposite channel effect: for co-products, the length of the product line is smaller in an indirect channel than in a direct channel. Additionally, we show that there exists a theoretical contract, combining revenue sharing and reverse slotting fees, that eliminates the indirect channel distortions in both product line design and output quantities.

This article studies the inventory competition under yield uncertainty. Two firms with random yield compete for substitutable demand: If one firm suffers a stockout, which can be caused by yield failure, its unsatisfied customers may switch to its competitor. We first study the case in which two competing firms decide order quantities based on the exogenous reliability levels. The results from the traditional inventory competition are generalized to the case with yield uncertainty and we find that quantity and reliability can be complementary instruments in the competition. Furthermore, we allow the firms to endogenously improve their yield reliability before competing in quantity. We show that the reliability game is submodular under some assumptions. The results indicate that the competition in quantity can discourage the reliability improvement. With an extensive numerical study, we also demonstrate the robustness of our analytical results in more general settings.

No abstract