Service Level Decisions Research Articles

Coordinating supply chains with stochastic demand by crashing lead times

In this paper, a method to coordinate a seller-buyer supply chain (SC) system by means of controlling the lead time (LT) with the consideration of different shipping modes is proposed. To be specific, two shipping modes (one fast and one slow) are considered in the proposed model. Through spending more and using a fast shipping mode, the seller can reduce LT. The cost of LT crashing is modeled as a fixed-charge step function in which a slow shipping mode can only reduce LT to a certain level and crashing LT beyond this level needs to replace the current shipping mode with a fast shipping mode. In this model, through controlling LT as an incentive mechanism, the seller motivates the buyer to participate in the joint decision making. The conditions for both members under which they are convinced to participate in the joint decision making plan are derived. The results show that more spending and, under certain circumstances, using the fast shipping mode can provide sufficient motivation for the buyer to coordinate the order quantity and the service level (SL) decisions in the supply chain simultaneously. Numerical experiments further demonstrate that the proposed model is highly applicable, especially under the case with high demand variations.

Tactical capacity planning for semiconductor manufacturing: MILP models and scalable distributed parallel algorithms

A multiperiod stochastic mixed‐integer linear programming model is developed to address the tactical capacity planning of semiconductor manufacturing with considerations of complex routing of material flows, in‐process inventory, demand and capacity variability, multisite production, capacity utilization rate, and downside risk management. Both planning level decisions (i.e., capacity allocation and customer service level decisions) as well as operational level decisions (i.e., production, inventory, and shipment decisions) can be simultaneously determined based on the two proposed multiobjective optimization models. To address the huge number of scenarios needed to characterize the uncertainty and the large number of first‐stage integer variables in industrial scale applications, two novel scalable distributed parallel optimization algorithms are developed to mitigate the computational burden. The proposed mathematical models and algorithms are illustrated through two case studies from a major US semiconductor manufacturer. Results from these case studies provide key decision support for capacity expansion in semiconductor industry. © 2016 American Institute of Chemical Engineers AIChE J, 62: 3930–3946, 2016

Coordinating a supply chain system for production, pricing and service strategies with disruptions

This paper investigates the coordination problem of a supply chain system composed of one supplier and one retailer. To coordinate, we apply revenue sharing contracts in the context of supply chain disruptions management. Herein, we consider disruptions at two factors namely demand and service sensitivity coefficient and propose a responsive pricing, service level, production and contract decisions model. Our results reveal that the proposed coordination mechanisms could lead to the supply chain system of interest achieving around 80% to 90% efficiency while satisfying win-win positions of the partners. In addition, this work illustrates that the coordinated supply chain produces more profit to the retailer. Our findings also indicate the original contracts for the non-disrupted supply chain system show some level of robustness to the scenarios that show a small increase of the market scale and service sensitivity coefficient. More specifically, the original contracts work fine as long as the increment of markets scale is less than 30% of the market base. However, for most of the cases, the production, pricing, service strategies, and contracts policies need to be adjusted to tackle the disruptions. We show the usefulness of our work by providing some numerical examples.

Pricing and Logistics Service Level Decisions in Retailer’s Dual-Channel Cooperation

Pricing and Logistics Service Level Decisions in Retailer’s Dual-Channel Cooperation

Decision Making About Rural Physiotherapy Service Provision Varies With Sector, Size and Rurality

Introduction: Decisions about physiotherapy service provision occur within the context of organisations, locations, and settings. The uniqueness of rural communities means it is important to consider contextual factors when making decisions about rural health services. As literature describing decision making about rural physiotherapy services is limited, this study sought perspectives on service level decision making (SLDM) from a range of stakeholders. The research approach needed to support consideration of both location and the broader health system. Method: A sequential mixed methods approach within a systems theory-case study heuristic provided the framework to explore rural physiotherapy SLDM. The investigation site, a large area of one Australian state, contained a mix of regional, rural, and remote communities. Perspectives on SLDM were obtained through surveys of physiotherapists, colleagues, and managers, with follow up interviews of a purposeful sample of participants. Results: Responses from physiotherapists, colleagues, manager surveys (n=34), and in-depth interviews (n=19) revealed commonalities and differences between sites and sectors. Available skill and expertise were common considerations across sites. Decisions about prioritisation of services occurred in both public and private settings; however, organisational priorities were a greater influence in the public sector and financial viability in the private sector. Service size influenced the perceived degree of autonomy of physiotherapists in SLDM, with physiotherapists in smaller sites having more independence. Directions from health facility management and the increasing need to prioritise services were reflected in physiotherapy responses from larger facilities. National health reforms and state level priorities were noted as influencing factors, as were connection to community, rurality, and the distance from decision makers. Conclusion: This study provides insight into decisions informing rural physiotherapy service provision. Understanding context and diversity is important to understanding local health service decisions. System level influences from macro and meso level decision makers provide the framework within which micro level physiotherapy SLDM occurs. Service sector, size and rurality then further qualify local service options and influence SLDM. Decisions about service provision need to take into consideration the current availability of services, the context of each location and skill mix required.

Study on Supply Chain Disruption Management under Service Level Dependent Demand

This paper studied pricing, service level, and production quantity decision problems in a supply chain with one manufacturer and one retailer under demand and production cost disruptions. The joint impact of demand and production cost disruptions on optimal pricing, service level, and production decisions in centralized and decentralized supply chain was analyzed, respectively. By solving the optimization problem, the optimal decisions of the supply chain were obtained under different demand and production cost disruptions scenarios. It is found that the original production quantity and demand-stimulating service level exhibit some robustness under disruptions in both centralized and decentralized supply chains, while the original optimal pricing does not. In centralized supply chains, it is always beneficial for the central decision-maker to knowing of the accurate information of disruptions. However, sharing disruption information is not always beneficial for both the manufacturer and retailer in decentralized supply chain.

What factors influence physiotherapy service provision in rural communities? A pilot study.

To obtain stakeholder perspectives on factors influencing rural physiotherapy service provision and insights into decision making about service provision. Purposive sampling, open-ended survey questions and semi-structured interviews were used in this exploratory, qualitative study. A rural centre and its regional referral centre formed the pilot sites. Nine participant perspectives were obtained on rural physiotherapy services. Stakeholder perspectives on factors influencing rural physiotherapy service provision and service level decision making. Workforce capacity and capability, decision maker's knowledge of the role and scope of physiotherapy, consideration of physiotherapy within resource allocation decisions and proof of practice emerged as key issues. The latter three were particularly reflected in public sector participant comments. Business models and market size were identified factors in influencing private practice. Influencing factors described by participants both align and extend our understanding of issues described in the rural physiotherapy literature. Participant insights add depth and meaning to quantitative data by revealing impacts on local service provision. Available funding and facility priorities were key determinants of public sector physiotherapy service provision, with market size and business model appearing more influential in private practice. The level of self direction or choice about which services to provide, emerged as a point of difference between public and private providers. Decisions by public sector physiotherapists about service provision appear constrained by existing capacity and workload. Further research into service level decision making might provide valuable insights into rural health service delivery.

Optimal Guaranteed Service Time and Service Level Decision with Time and Service Level Sensitive Demand

We consider a two-stage supply chain with one supplier and one retailer. The retailer sells a product to customer and the supplier provides a product in a make-to-order mode. In this case, the supplier’s decisions on service time and service level and the retailer’s decision on retail price have effects on customer demand. We develop optimization models to determine the optimal retail price, the optimal guaranteed service time, the optimal service level, and the optimal capacity to maximize the expected profit of the whole supply chain. The results of numerical experiments show that it is more profitable to determine the optimal price, the optimal guaranteed service time, and the optimal service level simultaneously and the proposed model is more profitable in service level sensitive market.

Coordinating price and service level decisions for a supply chain with deteriorating item under vendor managed inventory

This paper develops a Stackelberg game model of a one-supplier and one-retailer supply chain with deteriorating product to investigate how to coordinate the price and service level decisions under vendor-managed inventory (VMI) and examine system efficiency. We study the equilibrium price and service level decisions under the decentralized setting and the centralized setting, respectively; and design a generalized revenue-sharing mechanism to coordinate the supply chain. We find that the interaction between the retail price and the service level may invert the effect of deterioration rate on the retail price. The system efficiency of decentralized supply chain increases with market scale, price sensitivity, deterioration rate, the supplier's cost (including unit production cost, holding cost, and deterioration cost), and service investment efficiency, while decreases with production rate. In addition, we find that VMI may invert the effect of deterioration rate on the unit wholesale price of the decentralized supply chain; in the coordinated setting, the retailer should pay a higher transfer price to the supplier with VMI than that without VMI, the transfer price decreases with service investment efficiency, and higher service investment efficiency shrinks the transfer price difference.

Task Decomposition and Newsvendor Decision Making

We separate newsvendor order decisions into point forecasts, uncertainty judgments, and service level decisions in a behavioral laboratory experiment. Structuring order decisions in such a way can lead to performance improvements, and enable us to more closely examine these components. Point forecasts are influenced by the underlying overage and underage cost parameters, and suffer from demand chasing. Uncertainty judgments are subject to overconfidence, and service level decisions suffer from a cognitive dissonance bias where service levels are rarely set below 50 percent. In a set of additional experiments, we show that these biases can be partially mitigated by properly structuring and framing these lower level judgments and decisions.

Retail service for mixed retail and E-tail channels

Together with regular retail channel, a firm can distribute products directly through Internet (referred to as an “e-tail” distribution channel). The competitive edge of the retail channel lies in more value-added services, some of which are unavailable through the e-tail channel. We consider a model mixed with retailing and e-tailing distribution channels where the service level and price decision are made, respectively, ex ante and ex post demand realizations. From the firm’s perspective of managing the two channels, we acquire the optimal decisions and characterize the effects of the demand uncertainty on the firm’s optimal retail service and expected profit. Applying stochastic comparison method, we show the firm’s retail service and profit both increase in the demand mean, and the firm profits from the increase of the convex order of the demand by decreasing his service level. Further, if the coefficient of the demand increases, we characterize that the firm benefits from it. Finally, several numerical studies are presented to gain insights.

Joint pricing-servicing decision and channel strategies in the supply chain

This paper investigates the equilibrium behavior of a two-echelon supply chain in four channel strategies: (i) vertical integration, (ii) vertical Nash (iii) manufacturer’s Stackelberg and (vi) retailer’s Stackelberg. We examine the price and service level decision for each of the above four channel strategies in two cases: (i) Simultaneous service-level decision: Here, the manufacturer and retailer simultaneously choose a service level. (ii) Sequentially service-level decision: Here, the manufacturer and retailer sequentially choose a service level. We model the demand as a deterministic linear function of retailer’s price and both manufacturer’s and retailer’s service levels. We discuss the optimal configuration from each individual’s perspective for each of the above channel strategies. We show that vertical integration dominates other strategies and leads to the highest service level but lowest retail price among various channel coordination policies considered here. We yield several conclusions about the provision of service level by each supply chain individual to coordinate the channel.

Inventory service-level optimization within distribution network design problem

We propose a sequential heuristic approach to optimize inventory service levels in a two-stage supply chain. The proposed approach deals with service level and inventory decisions, simultaneously with network design decisions, and incorporating unfulfilled demand costs in a previous inventory-location model. A two-step formulation is considered, where the first step optimizes service level and the second step addresses location and inventory decisions. Each algorithm iteration solves an inventory-location model for a fixed service level, and then the service level is updated in order to reach an equilibrium condition between operating system and unfulfilled demand costs. The algorithm converged in three iterations for a set of sample instances, obtaining the same outcome in comparison with a more intuitive, exact, but more time-consuming search procedure.

Pricing, service level and lot size decisions of a supply chain with risk-averse retailers: implications to practitioners

This article develops a game theoretic model of a supply chain with one supplier and two risk-averse retailers competing in price, service and lot size, where the Economic Order Quantity (EOQ) production-inventory policy is adopted. After studying the existence of EOQ equilibrium, we investigate how to adjust their decisions when the economic environment changes. We find that one retailer will decrease its optimal lot size, retail price and service level when it becomes more risk averse or its service investment efficiency decreases. When the supplier's capacity increases, the retailers will reduce retail price and increase service level, which in turn results in a higher lot size. The effect of the risk sensitivity of one retailer on the rival retailer's decisions depends on the relative service cost efficiency of the retailer. When the absolute risk aversion and service investment efficiency of one retailer increase, the supplier's profitability will increase due to a higher total expected demand. We further give the managerial insights for practitioners, which helps managers to make right decisions in an uncertain environment.

Price and service competition of supply chains with risk-averse retailers under demand uncertainty

We develop a price–service competition model of two supply chains to investigate the optimal decisions of players under demand uncertainty. Each supply chain consists of one risk-neutral supplier and one risk-averse retailer. We analyze the effects of the retailers’ risk sensitivity on the players’ optimal strategies. We find that the higher the risk sensitivity of one retailer, the lower his optimal service level and retail price will be, while the effects of the rival's risk sensitivity on his decisions depend on the substitutability of the two products. The optimal wholesale price of one supplier is first increasing and then decreasing with the risk sensitivity of the two retailers if the substitutability is sufficiently low, otherwise decreasing with the risk sensitivity. The expected equilibrium order quantity of one retailer is often increasing with his risk sensitivity. We also study the effects of the wholesale prices and the service investment efficiencies on the retail price–service level decisions of the retailers. We find that the higher the service investment efficiency of one retailer, the lower the optimal retail price and service level of his rival will be.

A Model for Planning Resource Requirements in Health Care Organizations

ABSTRACTIn this paper we present a general model and solution methodology for planning resource requirements (i.e., capacity) in health care organizations. To illustrate the general model, we consider two specific applications: a blood bank and a health maintenance organization (HMO). The blood bank capacity planning problem involves determining the number of donor beds required and determining the size of the nursing and support staff necessary. Capacity must be sufficient to handle the expected number of blood donors without causing excessive donor waiting times. Similar staff, equipment, and service level decisions arise in the HMO capacity planning problem. To determine resource requirements, we develop an optimization/queueing network model that minimizes capacity costs while controlling customer service by enforcing a set of performance constraints, such as setting an upper limit on the expected time a patient spends in the system. The queueing network model allows us to capture the stochastic behavior of health care systems and to measure customer service levels within the optimization framework.

Setting customer service levels: an overall cost-approach

Customer service level decisions are usually based on qualitative market information and internal costs only. In this text we suggest an approach of using quantified costs information of both customer and supplier in setting service levels. After a brief introduction on how customer service can be defined we describe its typical cost-structure. Due to the characteristics of this cost-structure the use of unquantified and ambiguous market information in setting service levels can easily lead to under-servicing or over-servicing. The overall cost-approach in which both supplier and customer costs are considered better supports service level decisions. This approach must be used in combination with other service level considerations. Some conditions for using the approach are identified. The applicability of the approach is described in relation to typical customer-supplier relationships.