Browsing by Subject "Shipment consolidation"

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    Inbound replenishment and outbound dispatch decisions under hybrid shipment consolidation policies: an analytical model and comparison
    (2023-05-13) Wei, Bo; Çetinkaya, S.; Cline, D. B. H.
    We investigate operational decisions in a distribution warehouse facing stochastic demand and incurring fixed and linear transportation costs for the inbound inventory replenishment and outbound dispatch decisions. In order to realize scale economies associated with transportation both on the outbound and inbound sides, dispatch schedules and replenishment decisions at the warehouse must be synchronized over time. Immediate delivery policies on the outbound side are not financially viable because outbound dispatch operations will benefit from temporal shipment consolidation. Our focus in this setting is the analytical modeling of hybrid shipment consolidation policies and their comparison to the time-based and quantity-based counterparts. To this end, we propose analytical (exact and approximate) methods to compute and compare the cost under hybrid policies relative to its alternatives. Since shipment consolidation impacts customer waiting and inventory holding, we also investigate the average delay per order and average inventory per time unit as two important metrics of the distribution operation’s performance, along with the annual cost. We compare these metrics among the alternative under hybrid, time-based, and quantity-based policies. The comparison then allows us to offer an explicit analytical comparison of long-run average cost under these three policies without needing to solve the corresponding optimization problems. Notably, our results offer an analytical characterization of relative cost performance (vis-a-vis the numerical comparison available in the literature) and demonstrate the implications of alternative shipment consolidation policies regardless of the values of model parameters. The results are of practical value in the context of the design and operation of an integrated framework for inventory-transportation systems.
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    Word of mouth on action: analysis of optimal shipment policy when customers are resentful
    (Elsevier Ltd, 2023-03-04) Çavdar, Bahar; Erkip, Nesim Kohen
    Word-of-Mouth (WoM) communication via online reviews plays a vital role in customers’ purchasing decisions. As such, retailers must consider the impact of WoM to manage customer perceptions and future demand. This paper considers an online shopping system with premium and regular customers. Building on the behavioral and operations management literature, we model customer preferences based on the perceived service quality indicated by WoM and integrate this into the retailer's operational problem to determine a shipment policy regarding the timing of consolidated shipments and the treatment of regular demand. First, we study the e-tailer's problem when they have no knowledge of WoM and only react to the changes in demand. We analyze the long-term behavior of customer demand and show that potential market size and customer sensitivity are the key parameters determining this behavior. Then, we build a model to integrate the knowledge of WoM into operational decision-making and partially characterize the optimal solution. We show that (i) underpromise-and-overdeliver can be a hurtful strategy since it creates a false sense of fast delivery for the regular service, (ii) relaxations in operational constraints may hurt profitability due to the associated difficulties of managing perceptions, and (iii) seeking a stationary policy can lead to suboptimal solutions; therefore, cyclic policies should also be considered when appropriate. © 2023