Browsing by Author "Şen, A."
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Item Open Access Applied Materials uses operations research to design its service and parts network(Institute for Operations Research and the Management Sciences (INFORMS), 2010) Şen, A.; Bhatia, D.; Doǧan, K.Applied Materials Inc. is the global leader in nanomanufacturing technology solutions. It has a broad portfolio of innovative equipment, service, and software products and supports its customers worldwide with an extensive service and parts network with more than 100 locations. At the end of 2006, Applied Materials decided to evaluate and rationalize the design of its North American network. It set up a detailed optimization model (including 50,000 parts) to develop a network and distribution strategy. To our knowledge, this is the first large-scale multiechelon network-design model that incorporates safety stock inventory costs while considering the effects of lead time and risk pooling. The company used the model's recommendations to reduce costs while maintaining or improving its service to customers. The recommendations included simplifying the distribution network by consolidating depot locations for specific customers and skipping an echelon for others, thus leading to a projected inventory reduction of $10 million. The company is currently implementing these recommendations and has already eliminated five depots. Applied Materials estimates that during the first year of implementation, inventory reductions of $5.24 million and total savings of $1.1 million can be attributed to these network changes.Item Open Access Bundle pricing of inventories with stochastic demand(Elsevier, 2009) Bulut, Z.; Gürler, U.; Şen, A.We consider a retailer selling a fixed inventory of two perishable products over a finite horizon. Assuming Poisson arrivals and a bivariate reservation price distribution, we determine the optimal product and bundle prices that maximize the expected revenue. Our results indicate that the performances of mixed bundling, pure bundling and unbundled sales strategies heavily depend on the parameters of the demand process and the initial inventory levels. Bundling appears to be most effective with negatively correlated reservation prices and high starting inventory levels. When the starting inventory levels are equal and in excess of average demand, most of the benefits of bundling can be achieved through pure bundling. However, the mixed bundling strategy dominates the other two when the starting inventory levels are not equal. We also observe that an incorrect modeling of the reservation prices may lead to significant losses. The model is extended to allow for price changes during the selling horizon. It is shown that offering price bundles mid-season may be more effective than changing individual product prices.Item Open Access A comparison of fixed and dynamic pricing policies in revenue management(2013) Şen, A.We consider the problem of selling a fixed capacity or inventory of items over a finite selling period. Earlier research has shown that using a properly set fixed price during the selling period is asymptotically optimal as the demand potential and capacity grow large and that dynamic pricing has only a secondary effect on revenues. However, additional revenue improvements through dynamic pricing can be important in practice and need to be further explored. We suggest two simple dynamic heuristics that continuously update prices based on remaining inventory and time in the selling period. The first heuristic is based on approximating the optimal expected revenue function and the second heuristic is based on the solution of the deterministic version of the problem. We show through a numerical study that the revenue impact of using these dynamic pricing heuristics rather than fixed pricing may be substantial. In particular, the first heuristic has a consistent and remarkable performance leading to at most 0.2% gap compared to optimal dynamic pricing. We also show that the benefits of these dynamic pricing heuristics persist under a periodic setting. This is especially true for the first heuristic for which the performance is monotone in the frequency of price changes. We conclude that dynamic pricing should be considered as a more favorable option in practice.Item Open Access Competitive markdown timing for perishable and substitutable products☆(Elsevier, 2016-10) Şen, A.We model as a duopoly two firms selling their fixed stocks of two substitutable items over a selling season. Each firm starts with an initial price, and has the option to decrease the price once. The problem for each firm is to determine when to mark its price down in to maximize its revenue. We show that the existence and characterization of a pure-strategy equilibrium depend on the magnitude of the increase in the revenue rate of a firm when its competitor runs out of stock. When the increase is smaller than the change in the revenue rate of the price leader when both firms are in stock for all of the three possible scenarios, neither firm has the incentive to force its rival to run out of stock and if a firm marks its price down after the season starts, its inventory runs out precisely at the end of the season. When the increase is larger than the change of the price leader׳s revenue rate in one particular scenario, waiting until its rival runs out of inventory may be an equilibrium strategy for the larger firm even though this may lead to leftover inventory for itself. In other cases, there may be no pure-strategy equilibrium in the game. In certain regions of the parameter space, a firm׳s revenue may be decreasing in its starting inventory which shows that a firm may be better off if it can credibly salvage a portion of its inventory prior to the game. While most of our analysis is for open-loop strategies, in the final part of the paper, we show that the open-loop equilibrium survives as an equilibrium when we consider closed-loop strategies for an important subset of the parameter space.Item Open Access Demand uncertainty and inventory turnover performance: an empirical analysis of the US retail industry(Emerald Publishing, 2016) Hançerlioğulları, G.; Şen, A.; Aktunç, E. A.Purpose – The purpose of this paper is to investigate the impact of demand uncertainty on inventory turnover performance through empirical modeling. In particular the authors use the inaccuracy of quarterly sales forecasts as a proxy for demand uncertainty and study its impact on firm-level inventory turnover ratios. Design/methodology/approach – The authors use regression analysis to study the effect of various measures on inventory performance. The authors use a sample financial data for 304 publicly listed US retail firms for the 25-year period from 1985 to 2009. Findings – Controlling for the effects of retail segments and year, it is found that inventory turnover is negatively correlated with mean absolute percentage error of quarterly sales forecasts and gross margin and positively correlated with capital intensity and sales surprise. These four variables explain 73.7 percent of the variation across firms and over time and 93.4 percent of the within-firm variation in the data. Practical implications – In addition to conducting an empirical investigation for the sources of variation in a major operational metric, the results in this study can also be used to benchmark a retailer’s inventory performance against its competitors. Originality/value – The authors develop a new proxy to measure the demand uncertainty that a firm faces and show that this measure may help to explain the variation in inventory performance.Item Open Access Design and analysis of mechanisms for decentralized joint replenishment(Elsevier B.V., 2017) Güler, K.; Körpeoğlu, E.; Şen, A.We consider jointly replenishing multiple firms that operate under an EOQ like environment in a decentralized, non-cooperative setting. Each firm's demand rate and inventory holding cost rate are private information. We are interested in finding a mechanism that would determine the joint replenishment frequency and allocate the joint ordering costs to these firms based on their reported stand-alone replenishment frequencies (if they were to order independently). We first provide an impossibility result showing that there is no direct mechanism that simultaneously achieves efficiency, incentive compatibility, individual rationality and budget-balance. We then propose a general, two-parameter mechanism in which one parameter is used to determine the joint replenishment frequency, another is used to allocate the order costs based on firms’ reports. We show that efficiency cannot be achieved in this two-parameter mechanism unless the parameter governing the cost allocation is zero. When the two parameters are same (a single parameter mechanism), we find the equilibrium share levels and corresponding total cost. We finally investigate the effect of this parameter on equilibrium behavior. We show that properly adjusting this parameter leads to mechanisms that are better than other mechanisms suggested earlier in the literature in terms of fairness and efficiency. © 2016 Elsevier B.V.Item Open Access A joint replenishment policy with individual control and constant size orders(Taylor & Francis, 2010) Tanrikulu, M. M.; Şen, A.; Alp, O.We consider inventory systems with multiple items under stochastic demand and jointly incurred order setup costs. The problem is to determine the replenishment policy that minimises the total expected ordering, inventory holding, and backordering costs-the so-called stochastic joint replenishment problem. In particular, we study the settings in which order setup costs reflect the transportation costs and have a step-wise cost structure, each step corresponding to an additional transportation vehicle. For this setting, we propose a new policy that we call the (s, Q) policy, under which a replenishment order of constant size Q is triggered whenever the inventory position of one of the items drops to its reorder point s. The replenishment order is allocated to multiple items so that the inventory positions are equalised as much as possible. The policy is designed for settings in which backorder and setup costs are high, as it allows the items to independently trigger replenishment orders and fully exploits the economies of scale by consistently ordering the same quantity. A numerical study is conducted to show that the proposed (s, Q) policy outperforms the well-known (Q, S) policy when backorder costs are high and lead times are small.Item Open Access Manufacturer's mixed pallet design problem(Elsevier, 2008) Yaman, H.; Şen, A.We study a problem faced by a major beverage producer. The company produces and distributes several brands to various customers from its regional distributors. For some of these brands, most customers do not have enough demand to justify full pallet shipments. Therefore, the company decided to design a number of mixed or "rainbow" pallets so that its customers can order these unpopular brands without deviating too much from what they initially need. We formally state the company's problem as determining the contents of a pre-determined number of mixed pallets so as to minimize the total inventory holding and backlogging costs of its customers over a finite horizon. We first show that the problem is NP-hard. We then formulate the problem as a mixed integer linear program, and incorporate valid inequalities to strengthen the formulation. Finally, we use company data to conduct a computational study to investigate the efficiency of the formulation and the impact of mixed pallets on customers' total costs.Item Open Access Markdown budgets for retail buyers: help or hindrance?(Wiley-Blackwell, 2017) Şen, A.; Talebian, M.For many retailers, markdown decisions are taken by retail buyers whose compensation is based on sales revenue so their objective is to maximize it through the season. This implies that the buyers' objectives are not perfectly aligned with the overall profitability the firm. Many retailers set markdown budgets prior to the season to control margin erosion and increase profitability. Markdown budget constrains the buyers on the amount of discounts that they can apply on a given inventory of merchandise and sets a limit on the dollar value of markdowns for the season. While markdown budgets may be useful in preventing excessive discounts, they can have a detrimental effect on the buyers' ability to respond to poor market and remove distressed inventory. We investigate the effectiveness of this practice in aligning the incentives of buyers with that of the firm, and provide guidance on how these budgets should be established ahead of time. We consider a firm with a fixed inventory of a seasonable item, and a single chance to mark the price down. The retailer knows only the demand distribution at the beginning of the season, but the market information is revealed during the season to the buyer. We first characterize the buyer's markdown policy and understand the circumstances under which this can be different from the retailer's markdown policy. We use our model to determine the optimal markdown budget and quantify its effectiveness considering different factors such as the level of demand uncertainty, initial markup, and market's responsiveness to markdowns.Item Unknown Multi-period supplier selection under price uncertainty(Palgrave Macmillan, 2014) Şen, A.; Yaman, H.; Güler, K.; Körpeoğlu, E.We consider a problem faced by a procurement manager who needs to purchase a large volume of multiple items over multiple periods from multiple suppliers that provide base prices and discounts. Discounts are contingent on meeting various conditions on total volume or spend, and some are tied to future realizations of random events that can be mutually verified. We formulate a scenario-based multi-stage stochastic optimization model that allows us to consider random events such as a drop in price because o. The most favoured customer clauses, a price change i. The spot market or a new discount offer. We propose certainty-equivalent heuristics and evaluat. The regret of using them. We use our model for three bidding events of a large manufacturing company. The results show that considering most favored customer clauses in supplier offers may create substantial savings that may surpas. The savings from regular discount offers.Item Unknown Non-cooperative joint replenishment under asymmetric information(Elsevier, 2013) Körpeoğlu, E.; Şen, A.; Güler, K.We consider jointly replenishing n ex-ante identical firms that operate under an EOQ like setting using a non-cooperative game under asymmetric information. In this game, each firm, upon being privately informed about its demand rate (or inventory cost rate), submits a private contribution to an intermediary that specifies how much it is willing to pay for its replenishment per unit of time and the intermediary determines the maximum feasible frequency for the joint orders that would finance the fixed replenishment cost. We show that a Bayesian Nash equilibrium exists and characterize the equilibrium in this game. We also show that the contributions are monotone increasing in each firm's type. We finally conduct a numerical study to compare the equilibrium to solutions obtained under independent and cooperative ordering, and under full information. The results show that while information asymmetry eliminates free-riding in the contributions game, the resulting aggregate contributions are not as high as under full information, leading to higher aggregate costs.Item Unknown Optimal bundle formation and pricing of two products with limited stock(2009) Gürler Ü.; Öztop, S.; Şen, A.In this study, we consider the stochastic modeling of a retail firm that sells two types of perishable products in a single period not only as independent items but also as a bundle. Our emphasis is on understanding the bundling practices on the inventory and pricing decisions of the firm. One of the issues we address is to decide on the number of bundles to be formed from the initial product inventory levels and the price of the bundle to maximize the expected profit. Product demands follow a Poisson Process with a price dependent rate. Customer reservation prices are assumed to have a joint distribution. We study the impact of reservation price distributions, initial inventory levels, product prices, demand arrival rates and cost of bundling. We observe that the expected profit decreases as the correlation between the reservation prices of two products increases. With negative correlation, bundling cost has a significant impact on the number of bundles formed. When the product prices are low, the retailer sells individual products as well as the bundle (mixed bundling), when they are high, the retailer sells only bundles (pure bundling). The expected profit and the number of bundles offered decrease as the variance of the reservation price distribution increases. For high starting inventory levels, the retailer reduces bundle price and offers more bundles. The number of bundle sales decreases and the number of individual product sales increases when the arrival rate increases since the need for bundling decreases. Impacts of substitutability and complementarity of products are also investigated. The retailer forms more bundles, or charges higher prices for the bundle or both as the products become more complementary and less substitutable.Item Unknown Optimal streaming of a single job in a two-stage flow shop(Elsevier, 1998-10-01) Şen, A.; Topaloğlu, E.; Benli, Ö.Lot streaming is moving some portion of a process batch ahead to begin a downstream operation. The problem to be considered in this paper is the following: a single job consisting of U units is to be processed on two machines in the given order. Given a fixed number of possible transfer batches between the two machines, the problem is to find the timing and the size of the transfer batches (or, sublots) so as to optimize a given criterion. The schedules can be evaluated based on job completion, sublot completion, or item completion times. In the single job lot streaming problem, minimizing job completion time corresponds to minimizing the makespan, for which formulas for optimal sublot sizes are available. In this paper, the results for the sublot and item completion time models are presented. 0 1998 Elsevier Science B.V. All rights reserved.Item Unknown Performance bounds on optimal fixed prices(2013) Şen, A.We consider the problem of selling a fixed stock of items over a finite horizon when the buyers arrive following a Poisson process. We obtain a general lower bound on the performance of using a fixed price rather than dynamically adjusting the price. The bound is 63.21% for one unit of inventory, and it improves as the inventory increases. For the one-unit case, we also obtain tight bounds: 89.85% for the constant-elasticity and 96.93% for the linear price-response functions.Item Unknown A private contributions game for joint replenishment(2012) Körpeoǧlu, E.; Şen, A.; Güler, K.We study a non-cooperative game for joint replenishment by n firms that operate under an EOQ-like setting. Each firm decides whether to replenish independently or to participate in joint replenishment, and how much to contribute to joint ordering costs in case of participation. Joint replenishment cycle time is set by an intermediary as the lowest cycle time that can be financed with the private contributions of participating firms. We characterize the behavior and outcomes under undominated Nash equilibria.Item Unknown Spare parts inventory management with demand lead times and rationing(Taylor & Francis, 2007) Koçaǧa, Y. L.; Şen, A.We study an inventory system that consists of two demand classes. The orders in the first class need to be satisfied immediately, whereas the orders in the second class are to be filled in a given demand lead time. The two classes are also of different criticality. For this system, we propose a policy that rations the non-critical orders. Under a one-for-one replenishment policy with backordering and for Poisson demand arrivals for both classes, we first derive expressions for the service levels of both classes. The service level for the critical class is an approximation, whereas the service level for the non-critical class is exact. We then conduct a computational study to show that our approximation works reasonably, the benefits of rationing can be substantial, and the incorporation of demand lead time provides more value when the demand class with demand lead time is the critical class. The research is motivated by the spare parts service system of a major capital equipment manufacturer that faces two types of demand. For this company, the critical down orders need to be satisfied immediately, while the less critical maintenance orders can be satisfied after a fixed demand lead time. We conduct a case study with 64 representative parts and show that significant savings (as much as 14% on inventory on hand) are possible through incorporation of demand lead times and rationing.Item Unknown Style goods pricing with demand learning(Elsevier, 2009-08-01) Şen, A.; Zhang, A. X.For many industries (e.g., apparel retailing) managing demand through price adjustments is often the only tool left to companies once the replenishment decisions are made. A significant amount of uncertainty about the magnitude and price sensitivity of demand can be resolved using the early sales information. In this study, a Bayesian model is developed to summarize sales information and pricing history in an efficient way. This model is incorporated into a periodic pricing model to optimize revenues for a given stock of items over a finite horizon. A computational study is carried out in order to find out the circumstances under which learning is most beneficial. The model is extended to allow for replenishments within the season, in order to understand global sourcing decisions made by apparel retailers. Some of the findings are empirically validated using data from U.S. apparel industry.Item Unknown Technical note-a conic integer optimization approach to the constrained assortment problem under the mixed multinomial logit model(INFORMS The Institute for Operations Research and the Management Sciences, 2018) Şen, A.; Atamtürk, A.; Kaminsky, P.We consider the constrained assortment optimization problem under the mixed multinomial logit model. Even moderately sized instances of this problem are challenging to solve directly using standard mixed-integer linear optimization formulations. This has motivated recent research exploring customized optimization strategies and approximation techniques. In contrast, we develop a novel conic quadratic mixed-integer formulation. This new formulation, together with McCormick inequalities exploiting the capacity constraints, enables the solution of large instances using commercial optimization software.Item Open Access The US fashion industry: a supply chain review(Elsevier, 2008) Şen, A.The fashion industry has short product life cycles, tremendous product variety, volatile and unpredictable demand, and long and inflexible supply processes. These characteristics, a complex supply chain and wide availability of data make the industry a suitable avenue for efficient supply chain management practices. The industry has also been in a transition over the last 20 years: significant consolidation in retail, majority of apparel manufacturing operations moving overseas and, more recently, increasing use of electronic commerce in retail and wholesale trade. This paper aims to review the current state of operations and recent trends across the fashion supply chain in the US. We use industry-wide data, articles from business journals, industry reviews and extensive interviews with an apparel manufacturer in California, and a major US department store chain to describe the current operational practices and how the industry is restructuring itself during the transition, focusing at the apparel manufacture and retail segments of the supply chain.