By Rolf Hellermann
Arguably the relevant challenge in Operations study and administration S- ence (OR/MS) addressed through e-business is best coordination of provide and insist, together with rate discovery and aid of transaction expenditures of buyer-seller interactions. In capital-intensive industries like air shipment, the out-of-pocket charges of extra capability and the chance charges of underu- lized skill were very important elements riding the expansion of exchanges for making improvements to call for and provide coordination via e-business pl- varieties. Hellermann addresses in his dissertation probably the most fascinating - pects of this evolution for OR/MS, the parallel improvement of long term and temporary markets for potential and output, observed by means of a number of choice and ?xed-commitment (i. e. , ahead) contracts because the simple mec- nisms helping transactions. This has been a desirable subject for OR/MS study since it builds at the strong framework of genuine techniques, whereas connecting on to key operations judgements (capacity making plans, community layout, staf?ng, routing, upkeep, and so on) of the apparatus and applied sciences whose output is the focal point of contracts. From the point of view of perform, the built-in use of those Internet-based contracting mechanisms, as facilitated through new B2B exchanges, represents a chance for extra enhancing provide chain functionality and capital asset productiveness. As Hellermann notes, a critical characteristic of B2B for capital-intensive - dustries is that contracting must ensue good just before genuine delivery.
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Additional info for Capacity Options for Revenue Management: Theory and Applications in the Air Cargo Industry
2. The seller’s perspective on capacity reservation and the integration thereof in a revenue management system is discussed in Sec. 3. 24 3 Literature Review c w(Q) p c Manufacturer ˜ D w(Q) Q Q s Retailer s p ˜) min( Q, D Q ˜ D Production cost Wholesale payment Retail price Market demand Retailer’s order/ manufacturer’s shipment Salvage value Funds Material Information Source: adapted from Tsay et al. (1999, p. 304) Fig. 1. 2 Supply Contracts The supply chain management (SCM) literature treats environments in which multiple decision makers interact with each other for ordering and delivering a product.
P. 229). Quan (2002) draws an analogy of capacity reservations to ﬁnancial options (see also Sec. 2), arguing in the context of hotel room reservations that a hotel incurs a measurable (opportunity) cost by accepting a reservation while the reservation has a measurable value to the guest who can lock-in one room rate and search for a lower one. Quan ﬁnds this in contrast to the common practice of not charging guests for making or breaking reservations and attempts to value room reservations as European call options written on the price of a hotel room by applying the option-pricing model from Black and Scholes (1973).
Flexible contracts have been shown to be an effective means to achieve the contract purposes of system-wide performance improvement and risk sharing (see Sec. 2). , a system-wide performance improvement. This is achieved by introducing a base-load demand chosen ex ante by the buyer that determines the ex-post payment level and allocation rule. In a more standardized fashion, quantity ﬂexibility (QF) contracts specify the terms under which the buyer’s actually received quantity may deviate from the original order quantity Q.
Capacity Options for Revenue Management: Theory and Applications in the Air Cargo Industry by Rolf Hellermann