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In many supply chains consumption of indirect materials, sold by a supplier to a customer for use in her production process, can be reduced by efforts exerted by either party. Since traditional supply contracts provide no incentive for the supplier to exert such effort, shared-savings contracts have been proposed as a way to improve incentives in the(More)
T here are many materials for which the quantity needed by a firm is at best indirectly related to the quantity of final product produced by that firm, such as solvents in manufacturing processes or office supplies. For any such " indirect " materials, an inescapable incentive conflict exists: The buyer wishes to minimize consumption of these indirect(More)
We explore the management of inventory for stochastic-demand systems, where the product's supply is randomly disrupted for periods of random duration, and demands that arrive when the inventory system is temporarily out of stock become a mix of backorders and lost sales. The stock is managed according to the following modified (s, S) policy: If the(More)
We analyze a multi-echelon inventory system with inventory stages arranged in series. In addition to traditional forward material flows, used products are returned to a recovery facility, where they can be stored, disposed, or remanufactured and shipped to one of the stages to re-enter the forward flow of material. This system combines the key elements of(More)
This paper analyzes a series inventory system with stationary costs and stochastic demand over an infinite horizon. A distinctive feature is that demand can be negative, representing returns from customers, as well as zero or positive. We observe that, as in a system with nonnegative demand, a stationary echelon base-stock policy is optimal here. However,(More)
We consider a system in which a single finished good is assembled from two components. Demand for the finished product is stochastic and stationary, and procurement and assembly leadtimes are constant. Unsatisfied demand is backordered. The inventory of each component or assembly is controlled by a separate firm using a base-stock policy. Each firm is(More)
In this paper, we explore the impact of decentralized decision making on the behavior of multi-product assembly systems. Specifically, we consider a system where three components (two product-specific and one common) are used to produce two end products to satisfy stochastic customer demands. We study the system under both centralized and decentralized(More)
In this paper, we extend the results of Ferguson [10] on an end-product manufac-turer's choice of when to commit to an order quantity from its parts supplier. During the supplier's lead-time, information arrives about end product demand. This information reduces some of the forecast uncertainty. While the supplier must choose its production quantity of(More)