Essays in operations management

Heejong Lim, Purdue University

Abstract

In the first essay, we investigate the impact of reciprocity in the dyadic supply chain. Our study is motivated by the experiences of the semiconductor and LCD industries, we investigate the impact of reciprocity in the dyadic supply chain. A notable characteristic in the above technology industries is the alternating possession of bargaining power caused by cyclical demand. We incorporate a reciprocal game in a dyadic supply channel over two periods. We investigate how a supplier is influenced and protects himself during the oversupply period by anticipating the buyer's reciprocal behavior. Our results show that a supplier's understanding of a buyer's reciprocal behavior can mitigate double marginalization and can even fully coordinate the channel. This implies that even without a costly mechanism to resolve the double marginalization, appropriate consideration of the counterpart will increase channel efficiency. In the second essay, we consider a firm that manages a portfolio of customers placing orders that need replacement parts. The firm has both long-term and short-term customers. A long-term customer places both routine orders for routine maintenance and urgent orders due to emergency with a low margin for the firm and a short-term customer places urgent orders with a high margin for the firm. Routine orders provide stable loads and generate efficiency. Considering the increase in efficiency by routine orders, there is a trade-off between the efficiency and profitability of the order portfolio. Motivated by data provided by the company, we build an analytical model to support optimal decision making. We identify the impact of an additional urgent order to the cost embedded in the future operations. Finally, we model the mixed integer program to support the company's capacity plan. We conclude with in sights provided to the firm and managerial insights for optimal customer order portfolios. In the third essay, we focus on the economic benefit of profound technology projects as milestones are achieved. Ce-Al alloy project by CMI promotes an example. The project we use replaces the current aluminum (Al) alloy with Al-cerium (Ce) alloy in an engine block and an engine head to increase the operational efficiency of the vehicle. We can expect higher fuel efficiency as well as a lower cost of production. The Ce-Al alloy development project by the Critical Material Institute (CMI) announces an achievement level at every milestone. The model keeps track of two goals, efficiency improvement and production cost reduction. Based on the progress about those two R&D tracks, the research question involves when to add capacity for production to maximize profits and how to adjust the R&D strategy to maximize benefit. The problem is modeled in a Bayesian update and a stochastic dynamic program. Insights from the model were used to estimate the economic benefit for CMI and suggestion for improvement.

Degree

Ph.D.

Advisors

Iyer, Purdue University.

Subject Area

Management

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