Prof. Suresh Sethi, gave a lecture titled “Feedback Stackelberg games for dynamic supply chains with cost learning” at AMSS on 29, May 2018.
They studied a two-period supply chain in which a manufacturer produced a product, learnt to reduce cost, and sold it through a retailer with a price-dependent demand. The manufacturer's second-period production cost declined linearly in the first-period production with a random learning rate. The manufacturer might or might not have the option to carry inventory. They modeled the problem as a dynamic Stackelberg game and obtained an explicit feedback Stackelberg equilibrium. The explicit solution allowed them to examine the impact of mean learning rate and learning rate variability on the manufacturer's production and pricing decisions, as well as on the retailer's procurement and pricin decisions. They demonstrated that as the mean learning rate or the learning rate variability increased, the traditional double marginalization problem became more severe, leading to greater efficiency loss in the channel. They provided revenue sharing contracts that could coordinate the dynamic supply chain. In particular, when the manufacturer might hold inventory, they identified two major drivers for inventory carryover: market growth and learning rate variability. Lastly, they demonstrated the robustness of their results by examining a model in which learning took place continuously.
Prof Suresh Sethi is the Eugene McDermott Chair professor at the University Texas at Dallas. He is IEEE Fellow, SIAM Fellow, INFORMS Fellow, POMS Fellow, and Fellow of the Royal Society of Canada. He was President of Production and Operations Management Society in 2012.