The Logic of Logistics: Theory, Algorithms, and Applications for Logistics Management

454 Pages·2014·4.73 MB·English

by  David Simchi-Levi

Springer Series in Operations Research
and Financial Engineering
David Simchi-Levi
Xin Chen
Julien Bramel
The Logic
of Logistics
Theory, Algorithms, and Applications
for Logistics Management
Third Edition
Springer Series in Operations Research
and Financial Engineering
SeriesEditors:
ThomasV.Mikosch
SidneyI.Resnick
StephenM.Robinson
Forfurthervolumes:
http://www.springer.com/series/3182

David Simchi-Levi • Xin Chen • Julien Bramel
The Logic of Logistics
Theory, Algorithms, and Applications
for Logistics Management
Third Edition
123
DavidSimchi-Levi XinChen
MassachusettsInstituteofTechnology UniversityofIllinoisatUrbana-Champaign
Cambridge,MA,USA Urbana,IL,USA
JulienBramel
PineRiverCapitalManagement
NewYork,NY,USA
ISSN1431-8598 ISSN2197-1773(electronic)
ISBN978-1-4614-9148-4 ISBN978-1-4614-9149-1(eBook)
DOI10.1007/978-1-4614-9149-1
SpringerNewYorkHeidelbergDordrechtLondon
LibraryofCongressControlNumber:2013953645
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Tomywife, Yu,andmychildren,Jennifer,JonathanandHannah,fortheirlove
and support.
Xin Chen
In memory of Professor Uriel Rothblum, a friend, a colleague, and a scholar,
whose researchspans theory and applications.
David Simchi-Levi

Preface
We are pleased to introduce the third edition of the book, and we are thankful to
those who used the book in research and practice and to those who sent us com-
ments and feedback. As before, our objective is to present, in an easily accessible
manner, logistics and supply chain models, algorithms, and tools. In this edition,
we have attempted to build on the positive elements of the first two editions and
to include what we have learnedin the last few years,since the publication of the
second edition.
In the last two decades, the academic community has focused on addressing
many supply chain challenges. In some cases, the focus is on characterizing the
structure of the optimal policy and identifying algorithms that generate the best
possible policies. When this is not possible, the focus has been on an approach
whose purpose is to ascertain characteristics of the problem or of an algorithm
that are independent of the specific problem data. That is, the approach deter-
mines characteristics of the solution or the solution method that are intrinsic to
theproblemandnotthedata.Thisapproachincludestheso-calledworst-caseand
average-case analyses, which, as illustrated in the book, help not only to under-
stand characteristics of the problem or solution methodology, but also to provide
specificguaranteesofeffectiveness.Inmanycases,theinsightsobtainedfromthese
analysescanthenbeusedtodeveloppracticalandeffectivealgorithmsforspecific
complex logistics problems. Finally, game-theoretic approaches have been applied
in the last few years to provide more insights to supply chain models involving
competition and collaboration.
Wehavemadeseveralimportantchangestothethirdeditionofthistext.Many
of these changes have been a result of new research or consulting engagement we
have completed in the last few years. Our major changes include
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viii Preface
• anewchapterongametheory,whereweintroducethereadertokeyconcepts
and techniques (Chap.3),
• a new chapter on supply chain competition and collaboration, where we
extensively apply game theory (Chap.11),
• a new chapter on process flexibility, where we explain the power of limited
degree of flexibility (Chap.13),
• a new section (Sect.2.3) on discrete convex analysis,
• a new section (Sect.9.6) on stochastic inventory models with positive lead
times.
Additionally, we have extended the materials on integrated inventory and pricing
models,includingthreenewsectionsontheeconomiclotsizingmodelwithpricing
(Sect.8.4), demand models (Sect.10.2), and an alternative approach for deriving
the structure of optimal policies (Sect.10.5).
As before, this book is written for graduate students, researchers, and practi-
tioners interested in the mathematics of logistics and supply chain management.
We assume the readeris familiar withthe basicsoflinear programmingandprob-
ability theory and, in a number of sections, complexity theory and graph theory,
although in many cases these can be skipped without loss of continuity.
Parts of this book are based on work we have done either together or with
others. Indeed, some of the chapters originated from papers we have published in
journalssuchasMathematics ofOperationsResearch,MathematicalProgramming,
Operations Research, and IIE Transactions. We rewrote most of these, trying to
present the results in a simple yet general and unified way. However, a number of
key results, proofs, and discussions are reprinted without substantial change. Of
course, in each case this was done by providing the appropriate reference and by
obtaining permission of the copyright owner. In the case of Operations Research
and Mathematics of Operations Research, it is the Institute for Operations Re-
search and the Management Sciences (INFORMS). Chapter 13 is heavily based
on the paper by David Simchi-Levi and Yehua Wei, “Understanding the Perfor-
mance of the Long Chain and Sparse Designs in Process Flexibility,” which was
published in Operations Research in 2012. Chapter 14 borrows extensively from
“Supply Chain Design and Planning—Applications of Optimization Techniques
forStrategicandTacticalModels,”writtenby AnaMuriel andDavidSimchi-Levi
andpublishedintheHandbooks in Operations Research and Management Science,
the volumeon Supply Chain Management,S. GravesandA. G. Kok, eds., North-
Holland, Amsterdam. Similarly, Chap.20 borrowsextensivelyfromDesigning and
Managing the Supply Chain, written by DavidSimchi-Levi, Philip Kaminsky, and
Edith Simchi-Levi and published by McGraw-Hill in 2007.
Cambridge, MA David Simchi-Levi
Urbana-Champaign, IL Xin Chen
New York, NY Julien Bramel
Acknowledgments
It is our pleasure to acknowledge all those who helped us with the first, second,
and third editions of this manuscript. First, we would like to acknowledge the
contribution of our colleague Dr. Frank Chen, of the Chinese University of Hong
Kong. Similarly, we are indebted to our colleague Professor Rafael Hassin, of Tel-
Aviv University, and a number of referees, in particular, Professor James Ward
of Purdue University, for carefully reading the manuscript and providing us with
detailed comments and suggestions. We also would like to thank friends and col-
leagues Zhan Pang, Jin Qi, Diego Klabjan, Nir Halman, and Chenxi Zeng, whose
inputsgreatlyimprovedthemanuscript.Inaddition,wethankourformerandcur-
rentPh.D.studentsPhilipKaminsky,AnaMuriel,JenniferRyan,VictorMartinez
de Albeniz, Yehua Wei, Yan Zhao, Xiangyu Gao, Zhenyu Hu, and Limeng Pan,
who read through and commented on various chapters or parts of earlier drafts.
Our joint research and their comments and feedback were invaluable.
We would like to thank Edith Simchi-Levi, who is the main force behind the
developmentofthenetworkplanningsystemsdescribedinChap.20andwhocare-
fully edited many parts of the book.
It is also a pleasure to acknowledge the support provided by the National Sci-
enceFoundation,theOfficeofNavalResearch,theFundfortheCityofNewYork,
Accenture,BayerBusinessServices,DHL, FordMotorsCorporation,GeneralMo-
tors Corporation, Michelin, NASA, PwC, SAP, and Xerox. Their support made
the development of some of the theory presented in the book possible.
Ofcourse,wewouldliketothankoureditors,DonnaChernykandAchiDosanjh,
of Springer, who encouraged us throughout and helped us complete the project.
Also,thanks toEhrlich,Jamie,andthe editorialstaffatSpringerinNew Yorkfor
their help.
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