An authoritative, quantitative approach to supply chain management Addressing the need for the study of supply chain management to evolve at the same pace as it's real-world practice, Fundamentals of Supply Chain Theory presents the methodology and foundations of the topic and also demonstrates how recent developments build upon classic models. The authors focus on strategic and tactical aspects of supply chain management, covering a broad range of topics from forecasting, inventory management, and facility location to process flexibility, contracting, and auctions. Key mathematical models for optimizing the design, operation, and evaluation of supply chains are presented as well as models currently emerging from the research frontier. Following a thorough introduction, the book delves into a discussion of centralized models, including: * Forecasting and demand modeling * Deterministic inventory models * Stochastic inventory models * Multi-Echelon inventory models * Processes for dealing with uncertainty in inventory optimization and facility location * Facility location models * Process flexibility In addition, the authors present decentralized models that involve multiple parties with independent, conflicting objectives, covering topics such as: * The bullwhip effect * Supply chain contracts * Auctions Each chapter concludes with a set of problems that challenge readers to understand, interpret, and extend the discussed models and algorithms. In addition, extensive appendices provide guidance on writing proofs and also outline helpful formulas related to probability theory, calculus, and algebra. Extensively class-tested to ensure an easy-to-follow presentation, Fundamentals of Supply Chain Theory is a suitable book for business and engineering courses on supply chain management at the graduate level. The book also serves as an authoritative reference for academics and practitioners working in the areas of operations research, business, management science, and industrial engineering. This book was named the 2011 Joint Publishers Book of the Year by the Institute of Industrial Engineers. You can also follow Fundamentals of Supply Chain Theory on Twitter.

Table of Contents:
List of Figures xvii List of Tables xxi Preface xxiii 1 Introduction 1 1.1 Overview of Supply Chain Management 1 1.2 Levels of Decision Making in Supply Chain Management 3 1.3 Applications of Supply Chain Management 3 2 Forecasting and Demand Modeling 5 2.1 Introduction 5 2.2 Classical Demand Forecasting Methods 6 2.3 Demand Modeling Techniques 11 2.4 Bass Diffusion Model 12 2.5 Leading Indicator Approach 20 2.6 Discrete Choice Models 20 3 Deterministic Inventory Models 29 3.1 Introduction to Inventory Modeling 29 3.2 Continuous Review: The Economic Order Quantity Model 35 3.3 Periodic Review: The Wagner-Whitin Model 54 4 Stochastic Inventory Models 63 4.1 Preliminaries 63 4.2 Demand Processes 65 4.3 Continuous Review: (r, Q) Policies 65 4.4 Periodic Review with Zero Costs: Base-Stock Policies 75 4.5 Periodic Review with Non-Zero Fixed Costs: (s, S) Policies 90 4.6 Policy Optimality 95 5 Multi-Echelon Inventory Models 117 5.1 Introduction 117 5.2 Stochastic Service Models 121 5.3 Guaranteed Service Models 127 6 Dealing with Uncertainty in Inventory Optimization 143 6.1 Introduction 143 6.2 The Risk-Pooling Effect 143 6.3 Postponement 148 6.4 Transshipments 151 6.5 Introduction to Supply Uncertainty 158 6.6 Inventory Models with Disruptions 159 6.7 Inventory Models with Yield Uncertainty 167 6.8 The Risk-Diversification Effect 171 7 Facility Location Models 183 7.1 Introduction 183 7.2 The Uncapacitated Fixed-Charge Location Problem 185 7.3 A Multi-Echelon, Multi-Commodity Model 198 8 Dealing with Uncertainty in Facility Location 209 8.1 Introduction 209 8.2 The Location Model with Risk Pooling 210 8.3 Stochastic and Robust Location Models 223 8.4 A Facility Location Model with Disruptions 228 9 Process Flexibility 241 9.1 Introduction 241 9.2 Flexibility Design Guidelines 243 9.3 A Process Flexibility Optimization Model 247 10 The Bullwhip Effect 255 10.1 Introduction 255 10.2 Proving the Existence of the Bullwhip Effect 258 10.3 Reducing the Bullwhip Effect 269 10.4 Centralizing Demand System 272 11. Supply Chain Contracts 277 11.1 Introduction 277 11.2 Introduction to Game Theory 278 11.3 Notation 280 11.4 Preliminary Analysis 280 11.5 The Wholesale Price Contract 283 11.6 The Buyback Contract 288 11.7 The Revenue Sharing Contract 294 11.8 The Quantity Flexibility Contract 296 12. Auctions 305 12.1 Introduction 305 12.2 The English Auction 307 12.3 Combinatorial Auctions 309 Appendix A: Multiple-Chapter Problems 321 Appendix B: How to Write Proofs: A Short Course 327 Appendix C: Helpful Formulas 337 Appendix D: Langrangian Relaxation 341 Bibliography 349 Index