Jun Zhang

This paper studies the impact of channel structure on an upstream manufacturer's bundling incentive, with a focus on the implications of channel structure for bundling digital goods. We consider a distribution channel with a manufacturer and a retailer. The manufacturer produces two products, and sells them either separately or in the form of bundl...

We show that a two-product newsvendor problem with partial demand substitution is equivalent to the classical newsvendor problem with the same economic parameters but an adjusted demand –the effective demand. By comparing the adjusted demand and the primary demand stochastically, we examine the impacts of demand substitution on the expected profit...

We study the impacts of retail bundling on a supply chain with a manufacturer and a retailer.The retailer orders a primary product from the manufacturer before demand uncertainty materializes, and can retail it in a bundle with a secondary product afterwards. Our findings reveal three effects of bundling. First, bundling can help a retailer mitigat...

Enabled by the advances in information technology (IT), many supply chain partners have adopted the practice of vendor managed inventory (VMI) to improve operations e¢ ciency. While the IT investment for VMI implementation can be significant, the benefits of VMI to different supply chain members are not obvious based on anecdotal evidences and empi...

We consider a firm's sourcing problem from one reliable supplier and one unreliable supplier in two price-setting scenarios. In the committed pricing scenario, the firm makes the pricing decision before the supply uncertainty is resolved. In the responsive pricing scenario, the firm's pricing decision is made after the supply uncertainty is resolve...

Overconfidence is one of the most consistent, powerful, and widespread cognitive biases affecting decision making in situations characterized by random outcomes. In this paper, we study the effects and implications of overconfidence in a competitive newsvendor setting. In this context, overconfidence is defined as a cognitive bias in which decision...

Bandit products have captured significant market shares in China and have started to expand throughout the world. A striking feature of supply chains for bandit products is decentralization, where the upstream firm determines the product quality and the downstream firms compete on prices. We study the competition between a centralized mainstream fi...

A firm's two‐product bundling decision is examined when the supply of one product is limited and consumer valuations are normally distSteckeributed. The firm can choose to sell products separately and/or through a bundle. We find that the impact of limited supply on a firm's bundling decision depends on the correlation between the consumer valuatio...

We study retailer bundling in a distribution channel when the manufacturer for one bundled product can strategically set the wholesale price. We show that the retailer can use a bundling option as a strategic leverage to extract concessions from the manufacturer in form of a lower wholesale price. This finding contributes a novel rationale for reta...

We study a firm's optimal transshipment problem considering the impacts of setup costs for transshipment and demand distribution shapes. We assume that the demand follows a three-point distribution, which changes from a degenerate distribution, to a unimodal distribution, and to a bimodal distribution as the demand shape parameter increases. We fin...

We study a firm׳s sourcing strategy when facing two unreliable suppliers and a price-dependent isoelastic demand. At optimality, the firm always orders at least from the low-cost supplier. The firm also orders from the high-cost supplier if and only if the effective purchase cost from the low-cost supplier is greater than the actual purchase cost f...

It is generally believed that store brands hurt the manufacturers of competing national brands while benefiting retailers. In this paper, we challenge this notion by studying the impacts of a store brand when it is introduced by a power retailer. We show that a store brand may benefit the manufacturer when the interaction between the manufacturer a...

In this study, we use a game‐theory‐based framework to model power in a supply chain with random and price‐dependent demand and examine how power structure and demand models (expected demand and demand shock) affect supply chain members' performance. We demonstrate that whether a firm benefits from its power depends on the expected demand model but...

Bandit products have captured significant market shares in China and have started to expand throughout the world. A striking feature of supply chains for bandit products is decentralization, where the upstream firm determines the product quality and the downstream firms compete on prices. We study competition between a centralized mainstream firm a...

We study the risk pooling problem in a two-location inventory system, and analytically demonstrate that pooling improves the Type-I service levels at both locations. We also present an example showing that pooling may reduce the Type-II service levels at both locations.

We study sourcing and pricing decisions of a firm with correlated suppliers and a price-dependent demand. With two suppliers, the insight -- cost is the order qualifier while reliability is the order winner -- derived in the literature for the case of exogenously determined price and independent suppliers, continues to hold when the suppliers' capa...

We compare site-to-store and store-to-site strategies for dual-channel integration. The site-to-store (resp., store-to-site) strategy can …ll unmet orders in the physical channel (resp., online channel) with the inventory in the online channel (resp., physical channel). With one (physical) retail store, when only one channel should have inventory,...

We study sourcing decisions of price-setting and price-taking firms with two unreliable suppliers, where a price-setting firm sets the retail price after the supply uncertainty is resolved and a price-taking firm takes the retail price as given. We investigate the impacts of market conditions, suppliers' wholesale prices and their reliabilities on...

Patch management is a crucial component of information security management. An important problem within this context from a vendor's perspective is to determine how to release patches to fix vulnerabilities in its software. From a firm's perspective, the issue is how to update vulnerable systems with available patches. In this paper, we develop a g...

We study the problem of capacity exchange between two firms in anticipation of the mismatch between demand and capacity, and its impact on firm's capacity investment decisions. For given capacity investment levels of the two firms, we demonstrate how capacity price may be determined and how much capacity should be exchanged when either manufacturer...

This paper develops an exact formula for the fill rate of a single-stage inventory system that uses a general periodic-review base-stock policy. For normal demand, we present a fill-rate expression that uses the standard normal PDF and CDF, and develop two approximations for the fill rate.

We study the optimal contracting problem between two firms collaborating on capacity investment with information asymmetry. Without a contract, system efficiency is lost due to the profit-margin differentials among the firms, demand uncertainty, and information asymmetry. With information asymmetry, we demonstrate that the optimal capacity level is...

Recently, innovation-oriented firms have been competing along dimensions other than price, lead time being one such dimension. Increasingly, customers are favoring lead time guarantees as a means to hedge supply chain risks. For a make-to-order environment, we explicitly model the impact of a lead time guarantee on customer demands and production p...

This note extends some of the key results of Dong and Rudi (2004) to general demand distributions. This generalization is achieved in two steps. First, we build on the analysis of Dong and Rudi to demonstrate that an inventory problem with transshipment is equivalent to a newsvendor problem with an adjusted demand. Then, we study the impact of tran...

We consider stock positioning in a pure assembly system controlled using installation base-stock policies. When component suppliers have random capacity and end-product demand is uncertain, we characterize the system's inventory dynamics. We show that components and the end product play convex complementary roles in providing customer service. We p...

In this paper we consider a single period multi-product inventory problem with stochastic demand, setup cost for production, and one-way product substitution in the downward direction. We model the problem as a two-stage integer stochastic program with recourse where the first stage variables determine which products to produce and how much to prod...

We consider a two-echelon serial inventory system with demand and supply uncertainty, non-zero lead times for component procurement and end-product assembly, and a minimum customer service level requirement. We present two supply models which incorporate both quantity and timing uncertainty; these models correspond to current and proposed supply en...

We consider the problem of managing multi-customer service level requirements when inventory is rationed according to a priority list. We demonstrate that the optimal purchasing quantity for the two-customer problem may be found through a line search. For multi-customer problems, we derive a formula to find a near-optimal purchasing quantity.

Visteon's remanufacturing facility in Lamosa, Mexico was plagued with heavy fluctuations of supply and demand, leading to periods of severe capacity shortage. Management asked us to assess options for improving capacity. We developed a simulation-based line-configuration model that simultaneously considers line balancing and line length (number of...

Patch management is a crucial component of IT security programs. An important problem within this context is to determine how often to update the systems with necessary patches. Keeping the systems patched with more frequent patch updates increases operational costs while reducing security risks. On the other hand, leaving the systems unpatched wit...