ORIE Colloquium on 12/19/2013 - Adam Elmachtoub: Two Approaches for Integrating Revenue and Supply Chain Management

Thursday, December 19, 2013 at 4:15pm Frank H. T. Rhodes Hall, 253 ORIE Colloquium: Adam Elmachtoub (MIT) - Two Approaches for Integrating Revenue and Supply Chain Management We first describe a general framework called online customer selection, which allows suppliers to actively select which customers to serve. Specifically, customers arrive in an online manner, each with a set of requirements and associated revenue, and are either accepted or rejected upon arrival. Rejected customers incur a lost-sales cost while accepted customers are satisfied with minimum possible production cost. The goal of the supplier is to minimize the total cost of lost sales and production. We provide algorithms with strong performance guarantees that are based on new variants of repeated optimization as well as concepts from cooperative game theory. In the second part, we propose the use of opaque products in a retail setting. A product is said to be opaque when the customer only knows what they have purchased after the transaction is complete. Opaque products have been used in the hotel industry where customers purchase rooms without a priori knowledge of the brand name. In this work, we propose the use of opaque product selling in the retail industry with nonperishable goods and supply chain costs. We show that a small amount of opaque selling can achieve significant ordering and holding costs savings for the supply chain.