IE 572 - Production Planning Systems Design
Spring 2003
Instructor
Alper Sen, office: EA-321B, phone: 290-1539, e-mail: alpersen@bilkent.edu.tr
Course Schedule
Monday 10:40-12:30, Wednesday 9:40-10:30 (EA-322)
Office Hours
By appointment only
Course summary
This is a graduate level course in production and distribution systems planning. Major
emphasis will be given to the design and management of the supply chain. The topics that
are covered in this course include logistics network configuration, risk pooling and multiechelon inventory systems, value of information in supply chains, coordination of the
supply chain using contracts and other mechanisms, distribution strategies for the supply
chain and product design for supply chain efficiency.
The topics will be covered in two steps. First, the concepts, issues and solution
approaches will be introduced using material which is mostly qualitative. This first step is
aiming to get the student familiar with the main issues in designing and managing the
supply chain and practical innovations attempting to solve them. Lectures will include
real life examples or cases when possible. The second step will focus on recent academic
research in supply chain management. The emphasis will be on analytical modeling of
the supply chain. The analytical models either evaluate the performance of a particular
supply chain configuration or prescribe solutions or solution approaches. This part of the
lecture will be covered using recent papers that appeared in scholarly journals.
Course Textbook
Simchi-Levi, D., Kaminsky, P., and Simchi-Levi, E., Designing and Managing the Supply
Chain: Concepts, Strategies, and Cases, McGraw-Hill, 1999 ISBN: 0-07-235756-8.
Supplemental Texts
Chopra, S., and Meindl P., Supply Chain Management: Strategy, Planning and
Operation, Prentice Hall, 2001 ISBN 0-013-026465-2.
Tayur, S, Ganeshan R., and Magazine M. (eds), Quantitative Models for Supply Chain
Management, Kluwer Academic Publishers, 1999 ISBN 0-7923-8344-3
Student Responsibilities and Grading
Attendance is mandatory and students who will miss a class should inform the instructor
in advance. Class participation is required and students may need to prepare before the
class. The main responsibility of the student is reading and understanding each academic
paper (see the list of papers that are not underlined below) and presenting one in class.
The students are expected to understand the analytical modeling and derivations without
much help from the instructor, however a short introduction to inventory theory will be
provided in the first 2 weeks of the class.
Paper summary (25%)
Each student need to read each paper that will be discussed in the class and submit a one
page summary prior to the class. The summary should include a description of the
problem/phenomena studied in the paper, specific features that distinguish the paper from
earlier work, a verbal description of the analytical model, main analytical and
computational results and practical insights gained from the study.
Paper presentation (20%)
Each student need to present one paper (see the list of papers that are under required
sections below) in class. The presentation should be about 20-25 minutes which will be
followed by a class discussion.
Research proposal (30%)
Each student is required to study a specific topic of their choice (in supply chain
management, topics related to their thesis is fine as long as the linkages with SCM can be
established) in depth and submit a proposal for researching a specific problem. The
proposal should include a qualitative discussion of why the problem is important, a
detailed literature survey and proposed methodology and modeling tools to be used in the
research. Suggested research could be analytical modeling as well as an empirical study.
Main deliverable is a report describing the proposal; however a presentation may also be
necessary depending on the schedule.
Final (25%)
A written close books and notes exam covering the concepts and research covered in the
class.
Course Outline
Introduction
Required
 Simchi-Levi, Chapter 1
 G. J. van Ryzin, “Analyzing inventory cost and service in supply chains”,
Columbia Business School Teaching Note
Supplemental
 Chopra-Meindl, Chapter 1-3
 H. E. Scarf, “Inventory theory”, Operations Research, 50, 186-191 (2002)
Inventory Management and Risk Pooling
Required
 Simchi-Levi, Chapter 3
 G. P. Eppen, “Effects of centralization on expected costs in a multi-location
newsboy Problem”, Management Science, 25, 498-501 (1979)
 L. B. Schwarz, ‘A model for assessing the value of warehouse risk-pooling: risk
pooling over outside-supplier lead times”, Management Science, 35, 828-842
(1989)
 A. J. Clark and H. Scarf, "Optimal policies for the multi-echelon inventory
problem", Management Science, 6, 475-490 (1960)
 C. G. Sherbrooke, “Metric: a multi-echelon technique for recoverable item
control”, Operations Research, 16, 122-141 (1968)
Supplemental
 Chopra-Meindl, Chapter 7-8
Logistics Network Configuration
Required
 Simchi-Levi, Chapter 2
 S. J. Erlebacher and R. D. Meller, “The interaction of location and inventory in
designing distribution systems”, IIE Transactions, 32, 155-166 (2001)
 M. S. Daskin and C. R. Coullard, “An inventory-location model: formulation,
solution algorithm and computational results”, Annals of Operations Research,
110, 83-106 (2002)
Supplemental
 Chopra-Meindl, Chapter 10-11
 C. P. Teo, J. Ou and M. Goh, “Impact on inventory costs with the consolidation of
distribution centers”, IIE Transactions, 33, 99-110 (2000)
The Value of Information
Required
 Simchi-Levi, Chapter 4
 H. Lee, P. Padmanabhan, S. Whang, “Information distortion in a supply chain: the
bullwhip effect”, Management Science, 43, 546-558 (1997)
 F. Chen, Z. Drezner, J. K. Ryan and D. Simchi-Levi, “Quantifying the bullwhip
effect in a simple supply chain: the impact of forecasting, lead times and
information”, Management Science, 46, 436-443 (2000)
 H. Lee, K. C. So and C. S. Tang, “The value of information sharing in a two-level
supply chain”, Management Science, 46, 626-643 (2000)
 G. P. Cachon and M. Fisher, ‘Supply chain inventory management and the value
of shared information”, Management Science, 46, 1032-1048 (2000)
Supplemental
 Chopra-Meindl, Chapter 12-13
 C. J. Corbett and X. de Groote, “A supplier’s optimal quantity discount policy
under asymmetric information”, Management Science, 46, 444-450 (2000)
Distribution Strategies
Required
 Simchi-Levi, Chapter 5
 M. L. Spearman, “Customer service in pull production systems”, Operations
Research, 40, 948-958 (1992)
 S. Rajagopalan, “Make to order or make to stock: model and application”,
Management Science, 48, 241-256 (2002)
 K. L. Cheung and H. L. Lee, “The inventory benefit of shipment coordination and
stock rebalancing in a supply chain”, Management Science, 48, 300-306 (2002)
Supplemental
 S. Cetinkaya and L. Chung-Yee, “Stock replenishment and shipment scheduling
for vendor-managed inventory systems”, Management Science, 46, 217-232
(2000)
 J. Deleersnyder, T. J. Hodgson, H. Muller, P. J. O’Grady, “Kanban controlled pull
systems: an analytical approach”, Management Science, 35, 1079-1091 (1989)
Strategic Alliances
Required
 Simchi-Levi, Chapter 6
 B. A. Pasternack, “Optimal pricing and return policies for perishable
commodities”, Marketing Science, 4, 166-176 (1985)
 G. D. Eppen and A. V. Iyer, “Backup agreements in fashion buying: value of
upstream flexibility”, Management Science, 43, 1469-1484 (1997)
 Z. K. Weng, “Channel coordination and quantity discounts”, Management
Science, 41, 1509-1522 (1995)
 H. L. Lee and S. J. Whang “Decentralized multi-echelon supply chains: incentives
and information”, Management Science, 45, 633-640 (1999)
 V. Iyer and M. E. Bergen, “Quick response in manufacturing-retailer channels”,
Management Science, 43, 559-570 (1997)
 Y. Bassok and R. Anupindi, “Analysis of supply contracts with total minimum
commitment”, IIE Transactions, 29, 373-381 (1997)
Supplemental
 Chopra-Meindl, Chapter 13
 K. Moinzadeh and S. Nahmias, “Adjustment strategies for a fixed delivery
contract”, Operations Research, 48, 408-423 (2000)
 J. P. Monahan, “A Quantity Discount Pricing Model to Increase Vendor Profits”,
Management Science, 30, 720-726 (1984)
 K. L. Donohue, “Efficient supply contracts for fashion goods with forecast
updating and two production modes”, Management Science, 46, 1397-1411
(2000)
 P. Jeuland and S. M. Shugan, “Managing Channel Profits”, Marketing Science, 2,
239-272 (1983)
Coordinated Product and Supply Chain Design
Required
 Simchi-Levi, Chapter 8
 H. L. Lee “Effective Inventory and Service Management through Product and
Process Redesign”, Operations Resarch, 44, 151-159 (1996).
 H. L. Lee and C. Tang, “Modeling the costs and benefits of delayed product
differentiation”, Management Science, 43, 40-53 (1997)
Supplemental
 Y. Aviv and A. Federgruen, “Design for postponement: a comprehensive
characterization of its benefits under unknown demand distributions”, Operations
Research, 49, 578-598 (2001)