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To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.ejor.2005.04.021 Byline: Diwakar Gupta, Waressara Weerawat Keywords: Game theory; Inventory; Supply chain coordination; Incentives; Production economics Abstract: Manufacture-to-order is an increasingly popular strategy in commodity electronics and other similar markets where many different product configurations can be produced from common components. To succeed in this environment, manufacturers need to keep both cost and order fulfillment time low. In this article, we compare three different mechanisms that a manufacturer, whose revenues depend on order delays, may use to affect its component supplier's inventory decisions. These mechanisms are specifying components inventory level, offering a share of the earned revenues to the supplier (called simple revenue sharing), and offering a two-part revenue-sharing scheme. We show that whereas the first two approaches do not lead to supply chain coordination, the two-part scheme does. We demonstrate with numerical experiments that up to a point, the component supplier benefits from having a high utilization of its production facility, whereas the manufacturer benefits from having excess production capacity. Author Affiliation: Graduate Program in Industrial Engineering, Department of Mechanical Engineering, University of Minnesota, Minneapolis, MN 55455, United States Department of Industrial Engineering, Mahidol University, Thailand Article History: Received 10 March 2003; Accepted 1 April 2005

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.ejor.2004.07.048 Byline: Diwakar Gupta (a), Arthur V. Hill (b), Tatiana Bouzdine-Chameeva (c) Keywords: Retailing; Inventory; Pricing Abstract: The problem of setting prices for clearing retail inventories of fashion goods is a difficult task that is further exacerbated by the fact that markdowns enacted near the end of the selling season have a smaller impact on demand. In this article, we present discrete-time models for setting clearance prices in such an environment. When demand is deterministic, we compute optimal prices and show that decreasing reservation prices lead to declining optimal prices. When demand is stochastic and arbitrarily correlated across planning periods, we obtain bounds on the optimal expected revenue and on optimal prices. We also develop a heuristic procedure for finding near-optimal prices and test its accuracy through numerical experiments. These experiments reveal new insights for practitioners. For example, the penalty for choosing clearance price once and keeping it unchanged for the remainder of the selling season is found to be small when either the mean reservation prices do not change appreciably over time or when they drop sharply after the first period. Author Affiliation: (a) Department of Mechanical Engineering, Graduate Program in Industrial Engineering, University of Minnesota, 111 Church Street, SE Minneapolis, MN 55455, USA (b) Operations and Management Science Department, Curtis L. Carlson School of Management, University of Minnesota, 321 19th Avenue South, Room 3-150, Minneapolis, MN 55455-0413, USA (c) Department of Information, Decision and Management, Bordeaux Business School, 680 cours de la Liberation Talence 33405, France Article History: Received 2 September 2003; Accepted 15 July 2004

A model that facilitates the joint determination of product durability and order quantity for perishable goods is introduced. The model represents product durability choices in terms of a design parameter that influence the time-to-onset of deterioration (TOD) distribution. Using it, two scenarios were explored under the assumption of deterministic exponential decay. The first pertains to products with an expiry date while the second involves products with a random (TOD).