The Impact of a Target on Newsvendor Decisions

Chen, Lucy Gongtao; Long, Daniel Zhuoyu; Perakis, Georgia

doi:10.1287/msom.2014.0500

Cited by 52 publications

(44 citation statements)

References 28 publications

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“…, Chen et al. , Rockafellar and Uryasev ) is,

C V a R_{ρ} false(π (Q) false) = max_{v \in R} \{v + \frac{1}{ρ} E [min false(π (Q) - v, 0 false)]\},

where π ( Q ) denotes the firm's profit, Q is the order quantity, v is a threshold value of profit, ρ ∈ (0, 1] is a percentile value representing a firm's risk‐averse attitude. If ρ = 1, CVaR ρ ( π ( Q )) = E [ π ( Q )], and the CVaR model is degenerated into the classical risk‐neutral newsvendor model.…”

Section: The Modelmentioning

confidence: 99%

Push, Pull, and Supply Chain Risk‐Averse Attitude

Yang

Cai

Chen

2018

Production and Operations Management

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T he literature has shown that supply chain performance is affected by the allocation of inventory risk. Traditionally, a pull supply chain generates a higher optimal order quantity and hence higher supply chain profit than a push supply chain when firms are risk neutral. Extended from the classic push and pull newsvendor models, this study investigates the impact of firms' risk-averse attitudes on supply chain performance. Based on firms' conditional value-at-risk (CVaR), our analysis indicates that push can lead to a higher optimal order quantity than pull when the supplier is sufficiently more risk averse than the retailer. Meanwhile, pull contracts cannot always survive push challenge like in risk-neutral supply chains. We demonstrate that three-part tariff revenue sharing and buy-back contracts can coordinate both the push and the pull supply chains to achieve the Pareto optimality maximizing combined supply chain CVaR.

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“…, Chen et al. , Rockafellar and Uryasev ) is,

C V a R_{ρ} false(π (Q) false) = max_{v \in R} \{v + \frac{1}{ρ} E [min false(π (Q) - v, 0 false)]\},

Section: The Modelmentioning

confidence: 99%

Push, Pull, and Supply Chain Risk‐Averse Attitude

Yang

Cai

Chen

2018

Production and Operations Management

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“…Chen et al [41] further analysed the joint decision of price and inventory in a risk-averse setting. In follow-up studies, scholars have considered the impact of target management [45], supply uncertainty [46], and partial demand information [47] on the risk-averse buyer's optimal decision. Yang et al [48] expanded research to the supply chain level to analyse the supply chain coordination and sales discount strategies in a risk-averse setting.…”

Section: Risk Aversionmentioning

confidence: 99%

Optimal Operation Strategies under a Carbon Cap-and-Trade Mechanism: A Capital-Constrained Supply Chain Incorporating Risk Aversion

Liu

Jiang

et al. 2020

Mathematical Problems in Engineering

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Many small and medium enterprises (SMEs) with capital constraints often have no access or find it costly to obtain a loan from a bank; the retailer tends to borrow money from other enterprises in the supply chain by trade credit financing. We consider an emission-dependent supply chain with one emission-dependent manufacturer and one capital-constrained retailer in need of financing to explore the optimal operational and environmental strategies of a low-carbon supply chain under trade credit financing. We use a Stackelberg game model to depict the low-carbon supply chain. We analyse the optimal carbon-emission reduction effort, wholesale price, and order quantity in the equilibrium state. The impacts of key parameters, such as the retailer’s internal working capital, the manufacturer’s risk-aversion degree, and the carbon-trading price on the supply chain operation, are analysed. The results show that the retailer’s capital constraint causes the carbon-emission reduction effort, wholesale price, and order quantity to improve synchronously. The supply chain achieves a win-win outcome for both the manufacturer and the retailer when the capital-constrained retailer is funded via trade credit from the manufacturer. The in-depth development of financing is beneficial to the manufacturer but is a disadvantage for the retailer. When the initial carbon-emission quota is low, the manufacturer benefits from a relatively lower carbon-trading price. Otherwise, a higher carbon-trading price is better for the manufacturer. The “carbon-trading price trap” ensures that the retailer’s profit is minimal. We further investigate the scenario in which the manufacturer is risk averse and find that the retailer will purchase fewer products and that the manufacturer will gain less profit to decrease the carbon-emission reduction effort. The manufacturer’s risk aversion is unfavourable to both the economic and environmental outcomes of the whole supply chain. This research provides strategic support for a low-carbon supply chain to carry out operational decisions in the context of enterprise capital constraint. To examine the theoretical results, the data used in the existing literature are further used to simulate the corresponding conclusions. Our research enriches the existing supply chain finance literature and provides decision support for the supply chain core enterprise.

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“…Examples include Bordley and Kirkwood (2004), Abbas and Matheson (2005), Abbas et al (2009), and, to name a few. Lately, in Chen et al (2015), the impact of a target on newsvendor decisions has been investigated through optimizing the probability of achieving the target. Choi (2016a) studied the impact of the inventory service target on quick response fashion retail supply chains, and derived some closed-form managerial insights.…”

Section: Introductionmentioning

confidence: 99%

Balancing the profit and capacity under uncertainties: a target‐based distributionally robust knapsack problem

Ding

Chen

et al. 2021

Int Trans Operational Res

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As a well-developed optimization problem, the knapsack problem has been broadly applied in various fields involving resource allocations, especially production planning. In this paper, we propose a target-based distributionally robust knapsack problem (TDRKP), considering both uncertain profit and capacity, as well as the impact of a given target for profit. Based on a shortfall risk measure and piecewise utility function, the violation risk of the target is investigated. To solve the model efficiently, TDRKP is reformulated into computationally tractable form as a second-order conic program. Through a series of numerical experiments, we verify that the proposed TDRKP formulation performs better than both the sample average approximation model and the minimizing violation probabilities model.

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The Impact of a Target on Newsvendor Decisions

Cited by 52 publications

References 28 publications

Push, Pull, and Supply Chain Risk‐Averse Attitude

Push, Pull, and Supply Chain Risk‐Averse Attitude

Optimal Operation Strategies under a Carbon Cap-and-Trade Mechanism: A Capital-Constrained Supply Chain Incorporating Risk Aversion

Balancing the profit and capacity under uncertainties: a target‐based distributionally robust knapsack problem

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