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Eran Hanany• IDF general headquarters OR (1991-2001)• TAU Industrial Engineering dept. (2004-)• Visited Northwestern U. (2 yrs), UBC (1 yrs)• Main research areas:
– Game and Decision Theory, Operations Research
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Research methodology:• Qualitative stage:
– players (including policy maker/researcher), decision questions, processes and technology
• Quantitative, game theoretic modeling stage:– feasible actions (including data collection),
uncertainty, information (public/private), outcomes, objectives
– game analysis (analytic/numeric), including solution methods/algorithms
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Current research projects:• Basic research – game theoretic foundations:
– axiomatic decision theory under uncertainty– game theoretic solution concepts
• IE and Operations Management applications:– coordination and contracting of
supply chain, manufacturing, services
Design and Operations of Supply Chains with Transshipments
Eran Hanany, Michal TzurIndustrial Engineering Department
Tel Aviv University, Israel
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Decision Questions
• Preferred supply chain networks (linked partners)
• Optimal operational policies (production, inventory, transportation)
• Required contracts (incentives, operational and payment commitments)
• Required supporting information systems
Network Configuration(Centralized)
Incentive Mechanism (Decentralized)
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Find Optimal System Design
Find Optimal Operational Decisions
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Transshipments
• Movement of stock among locations in the same echelon of the supply chain
• Help reduce inventories and shortages• Improve the flexibility of the system• Often used in practice, using information
systems
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Processes• Several retailers facing random demand for the same item at
distinct markets• Asymmetric demand, cost structure and information
Decisions:• Quantity ordered from the supplier(s) by each retailer before
demand realization• Quantity transshipped from a certain retailer to each other
retailer after demand realization
Goals: • Find the best policy for all retailers together (centralized policy)• Find a coordinating mechanism for a decentralized system
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• When the system is decentralized, each retailer is
operating to maximize their own expected profit, given private information
• Incentive problems exist, so that the system may not be coordinated
• The challenge: design an incentive mechanism such that when the retailers maximize their expected profits, the centralized system solution is achieved
Incentive Mechanism Design Problemin a Decentralized System
Payment to the fund may not always equal payment from the fund.But net expected payments from/to the fund are zero.
Transshipment Fund Mechanism
isc
Fund
Retailer i Retailer j
sjcim jm
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Each transshipment link requires:• Investment that enables information sharing• Establishment of financial and administrative
arrangements (contracts)The number of transshipment links may be limited.
Network Configuration Design
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Potential Implementation
• Increase the organization’s competitive advantage through a better supply chain:– Restructuring the supply chain to better accommodate incentives
in a decentralized system– Reduce supply chain members’ conflicts– Increase the supply chain’s profits
• Decision Support System that will:– determine preferred SC configuration– determine incentive mechanisms and contracts – Recommend operational decisions
• Applicable to medium to large supply chains, such as those in the retail industry
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