Optimization of material sourcing and delivery operations, and assortment planning for vertically differentiated products and bundles
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Optimization of materials supply and inbound logistic operations has become increasingly important as firms have continued to pursue outsourcing options. Further, the proliferation of products and advances in information technology have greatly impacted retailers’ marketing strategies in the past decade. In this dissertation, we address how to optimally develop integrated sourcing and delivery planning, and how to optimally offer vertically differentiated products and bundles. In the first essay, we address a combined sourcing and delivery planning optimization problem, which is motivated by a practical problem facing materials and supply planners for construction projects in a leading corporation. We develop a decision support model and an effective solution approach for integrated sourcing and delivery planning for bulk materials. This approach, implemented and currently in use at the company to support material delivery planning for track maintenance projects, has yielded significant savings of millions of dollars annually. In the second essay, we study the problem of a retailer managing a category of vertically differentiated products. We consider two settings: the exogenous prices case and the endogenous prices case. In the former case, the selling prices are exogenously determined and the retailer’s only decision is to determine the set of products to offer. In the latter case, the retailer also determines the selling prices. We develop efficient methods to identify the optimal solutions for both cases and provide valuable insights and guidelines for practitioners. In the third essay, we study how to choose the optimal bundling strategy for a retailer offering vertically differentiated information goods. We characterize conditions under which pure bundling and mixed bundling strategies are optimal respectively. We provide efficient methods to identify which individual components to offer, whether or not to offer a bundle containing all the components and how to price the offered individual components and the bundle in order to maximize the retailer’s profit.