Retailer policy, uncertainty reduction, and supply chain performance

We investigate how the retailer’s inventory policy affects the total cost of a serial supply chain. When the retailer uses the locally optimal (s,S) policy, there is randomness in order time and order quantity to the supplier whereas the supplier sees randomness only in order quantity for the suboptimal (R,T) policy and only in order time for another suboptimal (Q,r) policy. Using an extensive computational study, we find that the suboptimal policies perform better from the total supply chain perspective. The benefit of policy changes is magnified when the retailer costs are low, when the supplier costs are high, and when there is information sharing.     

Optimal inventory control of empty containers in inland transportation system

In this paper, we deal with an inventory control problem of empty containers in an inland transportation system. In inland container transportation, freights (containers) are transported between terminal and the customer’s location by trucks, trains and barges. Empty containers are an important logistic resource and shipping companies try to operate and manage empty containers efficiently. Because of the trade imbalance between hub ports, empty containers should be periodically repositioned from surplus areas to shortage areas. However, it is not easy to exactly forecast the demand of empty containers, and we therefore need to build an efficient way to reposition the empty containers. In this paper, we consider a shortage area and propose an efficient inventory policy to control empty containers. We assume that demands per unit time are independent and identically distributed random variables. To satisfy the demand of empty containers, we reposition empty containers from other hubs based on the (s, S) inventory policy, and also consider the lease of empty containers with zero lead time. For the leased containers, we should return the number of empty containers leased to the leaser after the specified period. For a given policy, simulation is used to estimate the expected cost rate and we use the optimization tool, OptQuest^® in Arena to obtain the near optimal (s, S) policy in numerical examples.     

Single item inventory control under periodic review and a minimum order quantity

In this paper we study a periodic review single item single stage inventory system with stochastic demand. In each time period the system must order none or at least as much as a minimum order quantity Q_min. Since the optimal structure of an ordering policy with a minimum order quantity is complicated, we propose an easy-to-use policy, which we call (R, S, Q_min) policy. Assuming linear holding and backorder costs we determine the optimal numerical value of the level S using a Markov Chain approach. In addition, we derive simple news-vendor-type inequalities for near-optimal policy parameters, which can easily be implemented within spreadsheet applications. In a numerical study we compare our policy with others and test the performance of the approximation for three different demand distributions: Poisson, negative binomial, and a discretized version of the gamma distribution. Given the simplicity of the policy and its cost performance as well as the excellent performance of the approximation we advocate the application of the (R, S, Q_min) policy in practice.     

Disaggregation and consolidation of imperfect quality shipments in an extended EPQ model

We consider a standard economic production quantity (EPQ) model. Due to manufacturing variability, a fraction P of the produced inventory will have imperfect quality, where P is a random variable with a known distribution. We consider a 100% inspection policy and further assume that the inspection rate is larger than that of production. Thus, all imperfect quality items will be detected by the end of the production cycle. For such an augmented EPQ model, we first derive the new optimal production quantity assuming that the imperfect quality items are salvaged once at the end of every production cycle. Then, we extend this base model to allow for disaggregating the shipments of imperfect quality items during a single production run. Finally, we consider aggregating (or consolidating) the shipments of imperfect items over multiple production runs. Under both scenarios we derive closed-form expressions for both the economic production quantity and the batching policy, and show that our desegregation/consolidation schemes can lead to significant cost savings over the base model.     

The measurement of guanxi: Introducing the GRX scale

This study posits and examines a measurement scale for measuring guanxi based on three Chinese relational constructs - ganqing, renqing and xinren. Focusing on Anglo-Chinese buyer-seller relationships, the research reports the findings from six qualitative in-depth interviews and survey data obtained from over 200 Taiwanese trading companies. Based on exploratory and confirmatory factor analyses the findings from the final second-order confirmatory factor analysis of the guanxi model identified 11 items for measuring ganqing, renqing, xinren and guanxi respectively. The results offer a useful starting point in order for business practitioners to assess their guanxi and at the same time provide academics with a scale for operationalizing the measurement of guanxi.     

An examination of the influence of guanxi and xinyong (utilization of personal trust) on negotiation outcome in China: An old friend approach

Managers of multi-national enterprises (MNEs) are at a disadvantage in negotiating outcomes with their Chinese counterparts when compared to local competitors. The reasons include: local competitors are more flexible in handling business terms and conditions; local Chinese managers prefer to negotiate with their old friends or insiders in the same guanxi network; and MNE managers perceive that cultural practices such as gift-giving and guanxi are problematic. This study advances our understanding of negotiation by using a model developed for the reference of MNEs to establish an “old friend” relational status with their local Chinese counterparts. This approach emphasizes cultural adaptation for MNE managers to achieve satisfying negotiation outcomes in China.The study reveals the following unique issues: 1) in addition to their problem-solving attitude, MNE managers should practice mianzi and gift-giving to build renqing with their Chinese counterparts at a new friend stage; 2) the reciprocity dynamics of renqing should enable these managers to accumulate ganqing and to become old friends of their Chinese counterparts; 3) the establishment of ganqing between MNE managers and their Chinese counterparts should enable the development of xinyong between the two exchange parties; and 4) desirable negotiation outcomes can be built on xinyong.     

An investigation of setup instability in non-stationary stochastic inventory systems

In stochastic inventory systems unfolding uncertainties in demand lead to the revision of earlier replenishment plans which in turn results in an instability or so-called system nervousness. In this paper, we provide the grounds for measuring system nervousness in non-stationary demand environments, and gauge the stability and the cost performances of (R,S) and (s,S) inventory policies. Our results reveal that, both the stability and the cost performance of inventory policies are affected by the demand pattern as well as the cost parameters, and the (R,S) policy has the potential to replace the cost-optimal (s,S) policy for systems with limited flexibility.     

Evaluating the robustness of lead time demand models

This paper examines the robustness of lead time demand models for the continuous review (r, Q) inventory policy. A number of classic distributions, (e.g. normal, lognormal, gamma, Poisson and negative binomial) as well as distribution selection rules are examined under a wide variety of demand conditions. First, the models are compared to each other by assuming a known demand process and evaluating the errors associated with using a different model. Then, the models are examined using a large sample of simulated demand conditions. Approximation results of inventory performance measures—ready rate, expected number of backorders and on-hand inventory levels are reported. Results indicate that distribution selection rules have great potential for modeling the lead time demand.     

The uniform distribution as a first practical approach to new product inventory management

It is common sense that the premises usually considered in inventory models have little applicability to new product inventory management. This paper develops a first practical approach to deal with this issue: the solution to the (Q, r) inventory model for uniform demand forecasts and lead-times. Based on the fact that the uniform distribution is defined by two parameters that are easy to estimate—maximum and minimum—this paper shows that such a premise may comprise a helpful and accurate decision support tool for managers until they begin to learn about the distribution characteristics of the demand during the lead-time.     

A new lot-sizing heuristic for manufacturing systems with product recovery

We consider a deterministic model of the manufacturing system with product recovery. Two types of policies for the problem had been proposed in literature, namely the (1,R) policy, in which one manufacturing setup is followed by R remanufacturing setups and the (P,1) policy, which has P manufacturing setups, following every remanufacturing setup. Teunter (2004) developed heuristics to evaluate the cost for both policies and recommended choosing the better one among them. In this paper, we develop a new class of general (P,R) policies, where the long-run ratio of the number of manufacturing setups to the number of remanufacturing setups is P/R. Rather than have P manufacturing setups followed by R remanufacturing setups, we interleave (or intersperse) the setups of the manufacturing lots and the remanufacturing lots in such a way that the buildup of the recoverable inventory is minimized. We develop interleaving based (P,R) policy heuristics for the problem. Numerical results presented in the paper show that the proposed heuristic outperforms or performs as well as the best of the Teunter (2004) policies for all the problems tested.     

Guanxi vs. relationship marketing: Exploring underlying differences

The present paper attempts to explore the underlying mechanism between Western relationship marketing and Chinese guanxi by examining the construct equivalence of the two concepts. First, it distinguishes guanxi from relationship marketing in terms of the personal and particularistic nature of the relation. Second, it differentiates trust from xinyong, its counterpart in Chinese, based on a comparison of their roles in relationship building and maintenance. Third, it discusses the unique meaning of renqing, which is proposed as an underlying mechanism that guides behavior norms in guanxi and a mediator between trust or xinyong and long-term orientation. Finally, it concludes by discussing the managerial implications for international marketers who wish to succeed in the Chinese business market and the importance of adapting Western relationship marketing principles to guanxi marketing.     

The role of renqing in mediating customer relationship investment and relationship commitment in China

There is a growing research interest in guanxi marketing, which has been considered the Chinese version of relationship marketing. However, very little empirical research has investigated the implicit nature of renqing, the underlying mechanism that explains the cultivation and maintenance of guanxi. This study examines the role of renqing in mediating customer relationship investment and relationship commitment in the insurance industry. The authors surveyed 245 car insurance policyholders in China. The findings confirm the mediating role of renqing in such relationships and show that renqing explains a very high proportion of the variance in levels of customer relationship commitment. This result offers valuable insights and suggestions as to how to increase levels of customer relationship commitment in China.     

Base stock policies with degraded service to larger orders

We study an inventory system controlled by a base stock policy assuming a compound renewal demand process. We extend the base stock policy by incorporating rules for degrading the service of larger orders. Two specific rules are considered, denoted as Postpone(q,t) and Split(q), respectively. The parameter q distinguishes between regular orders (of size less than or equal to q) and larger orders. We develop mathematical expressions for the performance measures: order fill rate of the regular orders and average on-hand inventory level. We make numerical experiments where the postpone parameter t and the base stock levels of each rule are such that all customers (of both order types) are indifferent between the two rules. When comparing the difference in the average on-hand inventory levels, we can then make an assessment of the threshold value of the cost of splitting an order (which may otherwise be hard to quantify) in the rule Split(q). Our numerical results indicate that this threshold value is increasing in the variance of the order sizes. Based on the numerical experiment our conclusion is therefore that when the variance of the order sizes is low, then Postpone(q,t) seems to be a good option, while when the variance is high, then Split(q) is more competitive.     

Economic lot-sizing and dynamic quantity competition

We study a problem of dynamic quantity competition in continuous time with two competing retailers facing different replenishment cost structures. Retailer 1 faces fixed ordering costs and variable procurement costs and all inventory kept in stock is subject to holding costs. Retailer 2 only faces variable procurement costs. Both retailers are allowed to change their sales quantities dynamically over time. Following the structure of the economic order quantity (EOQ) model, retailer 1 places replenishment orders in batches and retailer 2 follows a just-in-time (JIT) policy. The objective of both retailers is to maximize their individual average profit anticipating the competitor's replenishment and output decisions. The problem is solved by a two-stage hierarchical optimization approach using backwards induction. The second-stage model is a differential game in output quantities between the two retailers for a given cycle length. At the first stage, the replenishment policy is determined. We prove the existence of a unique optimal solution and derive an open-loop Nash equilibrium. We show that both retailers follow contrary output strategies over the order cycle. The EOQ retailer, driven by inventory holding costs, decreases his market share whereas the output of the JIT retailer increases. Moreover, depending on the cost structure, the EOQ retailer might partially be a monopolist. At the first stage, the EOQ retailer determines the cycle length, anticipating the optimal output trajectories at the second stage.     

Logistics scheduling to minimize inventory and transport costs

We study a logistics scheduling problem where a manufacturer receives raw materials from a supplier, manufactures products in a factory, and delivers the finished products to a customer. The supplier, factory and customer are located at three different sites. The objective is to minimize the sum of work-in-process inventory cost and transport cost, which includes both supply and delivery costs. For the special case of the problem where all the jobs have identical processing times, we show that the inventory cost function can be unified into a common expression for various batching schemes. Based on this characteristic and other optimal properties, we develop an O(n) algorithm to solve this case. For the general problem, we examine several special cases, identify their optimal properties, and develop polynomial-time algorithms to solve them optimally.     

Investigating guanxi dimensions and relationship outcomes: Insights from Sino-Anglo business relationships

This study aims to develop and test a concept for improving Anglo-Chinese business relationships. By piecing together and incorporating both Chinese and western relationship constructs into a cohesive framework and testing this on a sample of Taiwanese importers, the study conceptually and empirically advances our understanding of the discipline further. Specifically, three facets of guanxi, namely ganqing (an affective element), renqing (reciprocation and favor), and xinren (personal trust) are conceptualized to determine cooperation and coordination, which in turn lead to improved performance. Based on a sample of 208 buyers (surveying perceptions of their relationships with Anglo suppliers), we provide empirical support for our concept and reveal that ganqing, renqing and xinren are crucial for fostering the development of such Sino-Anglo relationships. By providing an international flavor in terms of the constructs outlined and the importer-exporter context, the study provides fresh insights to help broaden our horizon further and understand more about relationships in an international context. Several implications are extracted from the study which a) western marketers importantly need to practice as they grapple to enter Chinese markets and nurture business relations, b) Chinese buyers can consider when managing their supplier portfolios and c) academics can use to help measure important relational constructs and undertaking research in a Chinese context.     

On the proportionality of EU spatial ex ante coexistence regulations: A comment

In their recent article in this journal, Demont et al. (2009) discuss the effects of alternative spatial ex ante coexistence regulations (SEACERs) in the context of the EU regulatory framework. We retain from Demont et al. (2009) that small pollen barriers should be considered as a possible regulatory option in all identifiable situations in which they are as effective as large isolation distances. This idea is in accordance with the proportionality principle of the 2003 EC Recommendation. But further analysis of how consumer choice and consumer welfare are affected should be conducted before supporting the idea that SEACERs should be flexible, that is that GMO farmers should always have the option of paying their non-GMO neighbours to implement the SEACERs in their own fields. We reject the authors’ argument that pollen barriers are necessarily more easily negotiable among neighbours (more “flexible”) than are isolation distances. We contest the relation of proportionality to the size of market signals for IP products. We contest the idea of shifting coexistence regulation from ex ante to ex post. We believe that any economic analysis of coexistence measures should include their welfare effects on consumers as well as on producers.     

Lead time reduction strategies in a single-vendor-single-buyer integrated inventory model with lot size-dependent lead times and stochastic demand

This paper studies alternative methods for reducing lead time and their impact on the safety stock and the expected total costs of a (Q,s) continuous review inventory control system. We focus on a single-vendor-single-buyer integrated inventory model with stochastic demand and variable, lot size-dependent lead time and assume that lead time consists of production and setup and transportation time. As a consequence, lead time may be reduced by crashing setup and transportation time, by increasing the production rate, or by reducing the lot size. We illustrate the benefits of reducing lead time in numerical examples and show that lead time reduction is especially beneficial in case of high demand uncertainty. Further, our studies indicate that a mixture of setup time and production time reduction is appropriate to lower expected total costs.     

Manufacturer-supplier guanxi strategy: An examination of contingent environmental factors

While guanxi is a cultural norm in China, the development and maintenance of guanxi can also be viewed as a business relationship management strategy that is leveraged by organizations in response to environmental conditions. The current research proposes that participation in guanxi is not equal to actively pursuing guanxi as a business strategy. Rather, firms respond to external environmental factors through guanxi management. Drawing on contingency theory and based on the perspectives of a China-based manufacturer respondent sample, a conceptual model of environmental factors that influence manufacturer-supplier guanxi is proposed and tested. The results indicate that supply and demand market uncertainties and legal environment complexity significantly affect levels of manufacturer-supplier guanxi, and that guanxi influences the use of non-coercive power by manufacturers. Contrary to expectations, manufacturer dependence on a major supplier did not influence levels of guanxi. The study findings and their implications extend current knowledge of inter-organizational guanxi and its influence on business-to-business relationships.