Edwin Romeijn, Department of Industrial and Systems Engineering University of Florida
Traditionally, supply chain planning problems have focused on cost minimization, in particular, on satisfying deterministic or random demand at minimum cost. More recently, attention has shifted to demand management, i.e., tools that can be used to influence demand, and thereby both revenues and supply chain costs. An important tool for demand management is pricing, a rich area of research that has been widely studied over the last decade. In this talk, we will discuss a different instrument for shaping demand: market selection. Here we may consider different physical markets in distinct spatial locations or different market segments. We will start with an overview of some of our recent research in the area, in which we have identified several integrated supply chain planning problems with market choice for which effective solution approaches exist. Examples are market selection variants of the economic order quantity problem, the newsvendor problem, and the economic lot-sizing problem. We also provide a more general framework for supply chain problems with market choice that are generally much harder to solve, and develop conditions under which constant-factor approximation algorithms exist.