The impact of alternative performance measures on single-period inventory policy

Previous Article
Convergence of optimal values of quadratic penalty problems for mathematical programs with complementarity constraints
JIMO Home
This Issue
Next Article
A derivative-free method for linearly constrained nonsmooth optimization

July 2006, 2(3): 297-318. doi: 10.3934/jimo.2006.2.297

The impact of alternative performance measures on single-period inventory policy

Alexander O. Brown ^1, and Christopher S. Tang ^2,

1.	Xilinx Inc., United States
2.	The Anderson School, UCLA, 110 Westwood Plaza, Los Angeles, CA 90095, United States

Received August 2004 Revised July 2005 Published July 2006

Abstract
Related Papers

While many firms and researchers have developed various supply chain solutions, there are many underlying reasons why these solutions have not been adopted in practice. Some key reasons, as articulated by Lee and Billington (1992), include organizational barriers, coordination challenges among marketing, manufacturing, and logistics, technical challenges in the area of information systems, as well as conflicting supply chain performance metrics. Other key reasons are due to alternative performance measures besides total expected relevant cost, which include sales target, product substitution, product clearance, sales per square foot, etc. In order to understand how these alternative performance measures affect the supply chain solution, we make an initial attempt to analyze how alternative measures would affect the simplest form of inventory policy, namely, the newsvendor solution. To identify various alternative measures and to explore how such order decisions are made, we conducted a simple experiment by giving a single-period inventory problem to 250 MBA students and 6 professional buyers who order fashion items. We observed that both groups select their order quantities less than the newsvendor solution and made their ordering decisions based on various specific performance metrics besides total expected cost. These observations have motivated us to analyze how these performance metrics would affect the ordering decision. Our analysis indicates that, under these performance metrics, it is rational for the decision maker to order less than the newsvendor solution.

Keywords: performance measures., Supply chain management.

Mathematics Subject Classification: Primary: 37C35; Secondary: 34C25, 37C25, 28D05, 34C3.

Citation: Alexander O. Brown, Christopher S. Tang. The impact of alternative performance measures on single-period inventory policy. Journal of Industrial & Management Optimization, 2006, 2 (3) : 297-318. doi: 10.3934/jimo.2006.2.297

[1]	Yeong-Cheng Liou, Siegfried Schaible, Jen-Chih Yao. Supply chain inventory management via a Stackelberg equilibrium. Journal of Industrial & Management Optimization, 2006, 2 (1) : 81-94. doi: 10.3934/jimo.2006.2.81
[2]	Shiva Moslemi, Abolfazl Mirzazadeh. Performance evaluation of four-stage blood supply chain with feedback variables using NDEA cross-efficiency and entropy measures under IER uncertainty. Numerical Algebra, Control & Optimization, 2017, 7 (4) : 379-401. doi: 10.3934/naco.2017024
[3]	Amin Aalaei, Hamid Davoudpour. Two bounds for integrating the virtual dynamic cellular manufacturing problem into supply chain management. Journal of Industrial & Management Optimization, 2016, 12 (3) : 907-930. doi: 10.3934/jimo.2016.12.907
[4]	Jun Li, Hairong Feng, Kun-Jen Chung. Using the algebraic approach to determine the replenishment optimal policy with defective products, backlog and delay of payments in the supply chain management. Journal of Industrial & Management Optimization, 2012, 8 (1) : 263-269. doi: 10.3934/jimo.2012.8.263
[5]	Jiuping Xu, Pei Wei. Production-distribution planning of construction supply chain management under fuzzy random environment for large-scale construction projects. Journal of Industrial & Management Optimization, 2013, 9 (1) : 31-56. doi: 10.3934/jimo.2013.9.31
[6]	Masoud Mohammadzadeh, Alireza Arshadi Khamseh, Mohammad Mohammadi. A multi-objective integrated model for closed-loop supply chain configuration and supplier selection considering uncertain demand and different performance levels. Journal of Industrial & Management Optimization, 2017, 13 (2) : 1041-1064. doi: 10.3934/jimo.2016061
[7]	Juliang Zhang, Jian Chen. Information sharing in a make-to-stock supply chain. Journal of Industrial & Management Optimization, 2014, 10 (4) : 1169-1189. doi: 10.3934/jimo.2014.10.1169
[8]	Juliang Zhang. Coordination of supply chain with buyer's promotion. Journal of Industrial & Management Optimization, 2007, 3 (4) : 715-726. doi: 10.3934/jimo.2007.3.715
[9]	Na Song, Ximin Huang, Yue Xie, Wai-Ki Ching, Tak-Kuen Siu. Impact of reorder option in supply chain coordination. Journal of Industrial & Management Optimization, 2017, 13 (1) : 449-475. doi: 10.3934/jimo.2016026
[10]	Liping Zhang. A nonlinear complementarity model for supply chain network equilibrium. Journal of Industrial & Management Optimization, 2007, 3 (4) : 727-737. doi: 10.3934/jimo.2007.3.727
[11]	Joseph Geunes, Panos M. Pardalos. Introduction to the Special Issue on Supply Chain Optimization. Journal of Industrial & Management Optimization, 2007, 3 (1) : i-ii. doi: 10.3934/jimo.2007.3.1i
[12]	Jia Shu, Jie Sun. Designing the distribution network for an integrated supply chain. Journal of Industrial & Management Optimization, 2006, 2 (3) : 339-349. doi: 10.3934/jimo.2006.2.339
[13]	Jun Pei, Panos M. Pardalos, Xinbao Liu, Wenjuan Fan, Shanlin Yang, Ling Wang. Coordination of production and transportation in supply chain scheduling. Journal of Industrial & Management Optimization, 2015, 11 (2) : 399-419. doi: 10.3934/jimo.2015.11.399
[14]	Feimin Zhong, Wei Zeng, Zhongbao Zhou. Mechanism design in a supply chain with ambiguity in private information. Journal of Industrial & Management Optimization, 2017, 13 (5) : 1-27. doi: 10.3934/jimo.2018151
[15]	Dengfeng Sun, Issam S. Strub, Alexandre M. Bayen. Comparison of the performance of four Eulerian network flow models for strategic air traffic management. Networks & Heterogeneous Media, 2007, 2 (4) : 569-595. doi: 10.3934/nhm.2007.2.569
[16]	Jingming Pan, Wenqing Shi, Xiaowo Tang. Pricing and ordering strategies of supply chain with selling gift cards. Journal of Industrial & Management Optimization, 2018, 14 (1) : 349-369. doi: 10.3934/jimo.2017050
[17]	Nina Yan, Baowen Sun. Comparative analysis of supply chain financing strategies between different financing modes. Journal of Industrial & Management Optimization, 2015, 11 (4) : 1073-1087. doi: 10.3934/jimo.2015.11.1073
[18]	Mitali Sarkar, Young Hae Lee. Optimum pricing strategy for complementary products with reservation price in a supply chain model. Journal of Industrial & Management Optimization, 2017, 13 (3) : 1553-1586. doi: 10.3934/jimo.2017007
[19]	Gang Xie, Wuyi Yue, Shouyang Wang. Optimal selection of cleaner products in a green supply chain with risk aversion. Journal of Industrial & Management Optimization, 2015, 11 (2) : 515-528. doi: 10.3934/jimo.2015.11.515
[20]	Ashkan Mohsenzadeh Ledari, Alireza Arshadi Khamseh, Mohammad Mohammadi. A three echelon revenue oriented green supply chain network design. Numerical Algebra, Control & Optimization, 2018, 8 (2) : 157-168. doi: 10.3934/naco.2018009

2018 Impact Factor: 1.025

American Institute of Mathematical Sciences