Integrating option procurement with advance selling under demand uncertainty
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    Abstract:

    Market variation is a serious problem which almost every firm will encounter in her operations. Especially for the retail industries which the lead time is relatively longer than the sales season,or for the firms which sell new products,the shortage and overstock induced by market dynamic is a great challenge. For this reason,how to decrease the risks which induced by market dynamic has become a hot topic in operations man-agement area. Recently,there are two research streams on this topic. One is that increase the procurement flexibility,the other one is“lock”a part of demand in advance. This paper integrates both streams together by considering option procurement and advance selling simultaneously. By developing profit maximization model, the paper analyzes the optimal quantities of firm products and options and the optimal discount rate for advance selling. And concluding that the expectation profit function is a joint concave function of procurement quanti-ties of firm products and options,and there exist the unique optimal discount rate of advance selling under nor-mal distribution demand. Finally,the paper designs a binary search algorithm to compute the optimal discount rate. The numerical examples give the comparing for different results.

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  • Online: April 17,2018
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