Essays in inventory decisions under uncertainty

Abstract

Uncertainty is a norm in business decisions. In this research, we focus on the inventory decisions for companies with uncertain customer demands. We first investigate forward buying strategies for single stage inventory decisions. The situation is common in commodity industry where prices often fluctuate significantly from one purchasing opportunity to the next and demands are random. We propose a combined heuristic to determine the optimal number of future periods a firm should purchase at each ordering opportunity in order to maximize total expected profit when there is uncertainty in future demand and future buying price. Second, we study the complexities of bundling of products in an Assemble-To-Order (ATO) environment. We outline a salvage manipulator mechanism that coordinates the decentralized supply chain. Third, we extend our salvage manipulator mechanism to a two stage supply chain with a long cumulative lead time. With significant lead times, the assumption that the suppliers all see the same demand distribution as the retailer cannot be used.