Reliability evaluation of hybrid power markets based on multiple transaction matrix and optimal transaction curtailment

A Monte Carlo simulation technique evaluates the reliability indices of restructured power systems with a hybrid market. A model for optimal transaction curtailment for a contingency state in a hybrid market is developed to incorporate the changes brought about by deregulation. The objective of the contingency optimal transaction curtailment for each individual generation company is to minimise its revenue loss. The problem is formulated as a linear programming problem and solved using an optimisation technique. Customer load curtailment, which is the basic parameter for reliability evaluation, is determined using a load-shedding philosophy which is based on the results of the optimal transaction curtailment by the genco. Supply and demand transactions of the market participants are represented by a transaction matrix. The impact of the firm and nonfirm bilateral and reserve contracts on customer reliabilities have been studied. The technique has been illustrated by application to the IEEE Reliability Test System.     

双渠道供应链的库存与定价策略研究

针对由传统零售渠道和网络直销渠道组成的双渠道供应链模型,考虑批发价格和传统零售价格确定情况下,同时市场需求随机且受价格影响时,对制造商在直销渠道上的最优定价和库存量决策,以及零售商在传统分销渠道上的最优订货量进行研究。通过模型分析和数值仿真说明：当需求分配比例处在一定范围内时,存在可行的直销价格。当加入直销价格不小于批发价格的约束条件后,在更小的需求分配比例范围内能够找到均衡解。且在此合理的区域内,传统零售渠道订货量减少,直销渠道库存量增大,但供应链总的销售量基本不变。零售商的期望收益有所增加,对于供应商,其来自于零售渠道的期望收益减少,来自于直销渠道的收益以及总收益增多。整个供应链的收益得到提高。     

Optimal ordering policy for a price-setting newsvendor with option contracts under demand uncertainty

In this article, we investigate the newsvendor problem in a joint ordering and pricing setting in the presence of option contracts under demand uncertainty. At the beginning of a single selling season, the newsvendor who faces additive stochastic demand can obtain goods through two ways: ordering from a firm or purchasing and exercising call options. Single ordering (ordering from a firm only or purchasing and exercising call options only) and mixed ordering (ordering from a firm and purchasing and exercising call options simultaneously) cases are investigated. We find that the newsvendor’s optimal pricing and ordering strategies exist and are unique for both cases, respectively. In addition, when both cases are available, mixed ordering is the newsvendor’s optimal ordering policy. If only single ordering is available, the newsvendor prefers ordering from a firm when demand risk is low, while enjoys purchasing and exercising call options when demand risk is high. We also find that with option contracts, the newsvendor’s optimal order quantity and maximum expected profit are all decreasing in the option price and exercise price of product, while the optimal retail price in terms of option price and exercise price of product are intricate. Moreover, we show that, mixed ordering is more capable to deal with supply price volatility risk.     

Dynamic programming approach to the bilateral contract scheduling

Bilateral forward contracts are generally used in electricity markets to stabilise prices and hedge electricity shortage risks. A contract party is able to draw electricity from the contract and resell it to the dayahead wholesale and retail markets. Contract parties schedule electricity deliveries over contract period to obtain the highest profit and estimate the acceptable contract price. Two types of contracts are introduced as a way to coordinate interests of the contract parties. The study formulates optimisation problems for contract scheduling. The stochastic dynamic programming technique is proposed as a numerical method for the problem solving. An algorithm based on preliminary construction of revenue functions is developed. A numerical example demonstrates the efficiency of the algorithm.     

考虑风险偏好的定价决策与需求信息共享价值分析

为了分析零售商的风险偏好对定价决策及信息共享价值的影响,以期望利润与条件风险估值的加权平均作为目标准则来刻画零售商的决策目标函数,构建供应链的需求信息共享决策模型,通过该模型,深入地分析和研究零售商不同风险偏好下供应链的最优定价决策以及需求信息共享的价值。研究表明,信息不共享情况下最优批发价与λ无关;当市场不确定信息显示需求增加时,最优批发价、最优零售价、零售商信息共享价值随着λ的增大而增大,而供应商和供应链的信息共享价值随着λ的增大而减小;而当市场不确定信息显示需求减少时,最优批发价、最优零售价、零售商信息共享价值随着λ的增大而减小,而供应商和供应链的信息共享价值随着λ的增大而增大。     

价格随机条件下的应急双向期权数量弹性契约

旨在用期权应对批发价格波动的风险,用数量弹性契约来应对市场价格和市场需求随机波动带来的风险,探索双向期权数量弹性契约协调供应链的内在规律。将双向期权契约与数量弹性契约相融合,协调批发价、市场价格和市场需求均随机波动的供应链,寻找最优的供应链决策,并进行了算例仿真。研究结果表明：在批发价格波动时,采用双向期权弹性契约比采用基准数量弹性契约效果更好。双向期权弹性契约可以协调批发价格和市场价格均随机的供应链。     

Supply chain management using put option contracts with information asymmetry

We study the problem of hedging demand uncertainty in a supply chain consisting of a risk-neutral supplier and a risk-averse retailer under a buyback contract. We use semi-variance of the possible profit values as a measure of the retailer’s risk attitude. We first study the setting where the supplier can observe the risk type of the retailer and find that in this case the supplier can design a buyback contract that extracts the maximum profit for the supplier. When the retailer’s type is unobservable, a new contract needs to be designed (the ‘option buyback contract’) and we show that in this case the retailers will self-select and chose an order quantity that maximises the total supply chain profit. Through numerical computations, we analyse the dynamics between the benefits of hedging risk, information rent and the retailer’s type, and outline cases when, depending on the shape of the reservation utilities of the retailers, it is too costly for the supplier to manage risk. In conclusion, our results show that whereas semi-variance has appealing properties as a measure of risk, its use introduces analytical challenges that can only be overcome through numerical computation.     

Market oriented bidding strategy considering market price dynamics and generation cost characteristics

This study presents a new approach to bidding for Gencos participating in a competitive market, which takes account of both the uncertainty as well as the cost characteristics of the generating units in an effort to make a reasonable profit from the operation. The price uncertainty is accounted for by representing the price appropriate statistical distributions. Such statistical representation of market price is utilised to enable a Genco to be successful in a bidding process with a specified degree of confidence. The screening curve commonly used in planning and operation of generators in traditional operation of power systems to characterise the economic merits of the generating units are utilised in this study to account for the costs incurred by the Genco in its operation and establish the desired level of bidding success in the market place. The logical development of the strategy is illustrated by implementing it for a Genco with three generating units, which are chosen to have competitive cost characteristics with respect to the market price. The results of the Genco operation are presented to illustrate that the methodology succeeds in securing reasonable profit. The simulation is extended to illustrate how the accuracy of the price modelling is important to ensure better profits.     

考虑气候风险的农产品供应链回扣与订货策略

为了分析气候风险对农产品供应链的收益影响,构建基于蛛网理论的回扣订货模型,该模型涉及提前期、气候温度、订购量3个参数,有效解决了气候风险对农产品供应链的影响。通过CVaR风险度量方法,给出了批发商在回扣模型中的最优订货决策。通过数值算例分析了供应链成员的收益变化。结果表明,考虑气候风险的回扣模型发挥了利润传递作用,有效降低农产品市场售价,扩大市场需求,削弱销售不确定性,提升了整个农产品供应链的盈利能力。     

Optimal policy in a hybrid manufacturing/remanufacturing system with financial hedging

This paper proposes a hybrid manufacturing/remanufacturing model with the financial hedging in the case where the randomness in demand is correlated with the financial markets. The provided models are mainly for those risk-averse remanufacturers who faced with random demand and yield. The aim of this paper is to maximise remanufacturer utility by purchasing financial instruments and producing new and remanufactured products. A hybrid manufacturing/remanufacturing system production planning model is first built under mean-variance framework, and then the financial hedging is integrated into the hybrid production system. There are three main findings. First, the variance of profit with financial hedging is always less than the variance of the model without financial hedging. Second, the remanufacturer with high (low) risk aversion is more likely to produce new (remanufactured) products. Third, the model without (with) financial hedging tends to produce new (remanufactured) products unless remanufacturing cost is low (high) enough. All those findings proved that financial hedging can reduce the operational uncertainty effectively and increase the proportion of remanufacturing, which will make remanufacturing firms more economical and environmentally friendly. Therefore, remanufacturing firms can consider using financial hedging to reduce operational uncertainty.     

Offshore manufacturing contract design based on transfer price considering green tax: a bilevel programming approach

The problem of designing offshore manufacturing contract resulting in optimal transfer price is troubling multinational companies over the past few years. This paper proposes designing offshore manufacturing contracts based on the transfer price in the form of bilevel programming problems after considering green tax. In these contract designs, a firm in a developed country sells a single product in its market. The same product is simultaneously being manufactured by another firm in a developing country with lower manufacturing cost. After anticipating the consumer demand, the seller places an order, based on which the manufacturer manufactures the ordered quantity, and offers a transfer price which in turn maximises its net profit after paying green tax to its government. While setting the transfer price, the manufacturer considers the manufacturing cost, the export duty payable to its government and the cost of shipping the product to the developed country. After buying the product from the manufacturer at the transfer price, the seller then sets the retail price which maximises its net profit after paying the import duty to its government; the retail price, however, must not be more than the maximum retail price applicable to the market. Thus, offshore manufacturing contract results in optimal after-tax profits for both the firms. An experimental study has been carried out to discuss the practical aspects of the results developed, where a US firm is offshoring its manufacturing activity to a Chinese firm in order to draw maximum profit.     

Hydro energy management optimization in a deregulated electricity market

When electricity prices were regulated, hydropower optimization often considered only the inflow uncertainty. In a deregulated electricity market, price uncertainty must be also considered in addition to inflow uncertainty. This makes the operation problem more challenging due to inclusion of the objective of minimizing risk. It also makes the objective function nonlinear while the estimation of risk is problematic. For dealing with uncertainty, a set of finite scenarios of inflow or price sequences may form the evolution of information over the stages that are used in optimization algorithms. Such implicit optimization methods can be seen as an extension of deterministic optimization. A disadvantage is the number of scenarios may grow exponentially in multi-stage optimization problems, even with only a few branches at each stage. An explicit method, denoted as the Fletcher-Ponnambalam model (FP), has been recently developed for the first and second moments of the storage state distributions in terms of moments of the inflow distributions. This method provides statistical information on the nature of random behaviour of the system state variables without any discretization and hence suitable for multireservoir problems. Also not considering scenarios makes it computationally inexpensive, as there is little growth to the size of the original problem. In this paper, we introduce the price uncertainty into the FP model; our results indicate that the method could achieve optimum policy considering also the reduction of risk, using the second moment information. Our study is for medium term operations of a single reservoir. The results are compared with corresponding results from simulation and where possible, with the well-known Benders' Decomposition method (BD).     

Game Theory Based Decision Coordination Strategy of Agricultural Logistics Service Information System

Under the background of “Internet plus” rapid development, the agricultural logistics industry should apply information technology to every link of the agricultural product logistics industry chain. By making full use of the decision making module of the agricultural logistics information system, we can realize the full sharing of information and data resources, which makes the decision-making scheme of the agricultural logistics information system more optimized. In real economic society, the uncertainty and mismatch between the customer’s logistics service demand and the logistics service capability that the logistics service function provider can provide, that is, when the two information are asymmetric, how to use the third-party contract to coordinate the income and profit distribution of the two, to make the information system decision making more reasonable? This paper mainly studies the coordination scheme of agricultural logistics information system decision making under uncertain output and demand information by introducing the spot market. A joint coordination strategy based on revenue sharing and penalty feedback contracts proposes decentralized decision making based on game theory. Experiments show that the flexible ordering strategy proposed in this paper can reduce the logistics service supply chain’s uncertainty and significantly improve the logistics service supply chain’s overall income level through coordination contracts.     

不确定条件下供应链期权契约风险分担模型

供应链期权契约是应对市场需求不确定性的一种重要途径,然而期权价格又给供应链带来了新的风险。针对供应链期权契约的风险分担问题,提出了根据谈判能力协商确定期权价格从而达到风险分担的方法。在市场不确定条件下,以单个制造商和单个零售商组成的供应链为研究对象,建立了基于谈判能力的供应链期权契约风险分担模型,分析了谈判能力对供应链订购量、生产安排以及期望收益的影响。研究发现,期权契约可以提高供应链各成员的期望收益,随着制造商谈判能力的增强,零售商的订单数量增加,期权数量减少,制造商的谈判能力降低了供应链的总期望收益。通过数值仿真分析,进一步验证了通过谈判分担期权契约风险的有效性,获得了对制定供应链期权价格具有指导意义的研究结论。      

Value chain management for commodities: a case study from the chemical industry

We present a planning model for chemical commodities related to an industry case. Commodities are standard chemicals characterized by sales and supply volatility in volume and value. Increasing and volatile prices of crude oil-dependent raw materials require coordination of sales and supply decisions by volume and value throughout the value chain to ensure profitability. Contract and spot demand differentiation with volatile and uncertain spot prices, spot sales quantity flexibility, spot sales price–quantity functions and variable raw material consumption rates in production are problem specifics to be considered. Existing chemical industry planning models are limited to production and distribution decisions to minimize costs or makespan. Demand-oriented models focus on uncertainty in demand quantities not in prices. We develop an integrated model to optimize profit by coordinating sales quantity, price and supply decisions throughout the value chain. A two-phase optimization approach supports robust planning ensuring minimum profitability even in case of worst-case spot sales price scenarios. Model evaluations with industry case data demonstrate the impact of elasticities, variable raw material consumption rates and price uncertainties on planned profit and volumes.     

Pull and push contracts in a decentralised assembly system with random component yields

This study investigates how random component yields can influence pricing and production decisions under pull and push contracts. We consider a decentralised assembly system where a manufacturer procures complementary components from two suppliers with random yields. We first characterise the centralised equilibrium decision as a benchmark and then analyse the equilibrium solutions in a decentralised assembly system under each contract. We find that neither contract is always superior to the other in terms of system profit. Under a push contract, suppliers always achieve the first mover advantage with higher payoff. However, the first mover advantage does not hold for the manufacturer under a pull contract. We further conduct sensitivity analysis to study the impact of random component yields and retail price on equilibrium solutions under each contract. Interestingly, the wholesale prices charged by suppliers always increase with supply yield uncertainty under a pull contract, but decrease under a push contract. In contrast with the centralised solution, the equilibrium quantities in the decentralised solution decrease with supply yield uncertainty under both pull and push contracts. We then extend our model to a general case with multiple suppliers. The system payoff decreases with the number of suppliers, and the main results derived in two suppliers setting still hold in the system with multiple suppliers.     

Allocation flexibility for agribusiness supply chains under market demand disruption

This paper develops a multi-commodity multi-period optimisation model to analyse market demand disruption risk in agribusiness supply chains. It investigates the role of allocation flexibility and the effectiveness of multiple risk management strategies for achieving allocation flexibility. A robust optimisation formulation is used to obtain risk-averse solutions for an objective combining expected profit and risk. Numerical results are presented for a real-life case study of Zespri’s kiwifruit supply chain. The results show that allocation flexibility is effective for mitigating market demand disruption risk. Three proposed risk management strategies, namely diversified demand market, backup demand market and flexible rerouting, improve both expected profit and risk measures. While diversified demand market and backup demand market strategies are equally important for all decision-makers, flexible rerouting is especially significant for less risk-averse decision-makers.     

On the newsvendor model with conditional Value-at-Risk of opportunity loss

To manage the risk arising from uncertainty in market demand, this paper introduces the Conditional Value-at-Risk (CVaR) measure into the decision framework of the newsvendor who aims to minimise his opportunity loss. It is found under the CVaR measure that the newsvendor’s optimal order quantity is increasing in the confidence level when the understock loss is bigger than the overstock loss. This implies that an over-ordering may be even more caused by the newsvendor’s risk aversion about opportunity loss than risk seeking behaviour. Under this optimal order quantity, it is proved that the newsvendor’s expected profit and expected opportunity loss are decreasing and increasing in the confidence level, respectively. Furthermore, some management insights are presented to facilitate the risk management of the newsvendor model.     

Optimal supply contract selection

Selection of supply contracts is a critical decision faced by manufacturing firms in a variety of industries. Manufacturing firms often have the option of selecting from several types of supply contracts that include long-term, medium-term, and short-term contracts. While extant literature has stressed the importance of such contracts, few methodologies have been proposed for optimally selecting contracts under various business conditions. To this end, this paper proposes a methodology for optimal contract selection based on a mixed-integer programming approach. We present specific insights to manufacturing managers on choosing the right contracts in the presence of market price uncertainty, supplier discounts, investment costs, and supplier capacity restrictions.     

Risk intermediation in supply chains

This paper demonstrates that an important role of intermediaries in supply chains is to reduce the financial risk faced by retailers. It is well known that risk averse retailers when faced by the classical single-period inventory (newsvendor) problem will order less than the expected value maximizing (newsboy) quantity. We show that in such situations a risk neutral distributor can offer a menu of mutually beneficial contracts to the retailers. We show that a menu can be designed to simultaneously: (i) induce every risk averse retailer to select a unique contract from it; (ii) maximize the distributor's expected profit; and (iii) raise the order quantity of the retailers to the expected value maximizing quantity. Thus inefficiency created due to risk aversion on part of the retailers can be avoided. We also investigate the influence of product/market characteristics on the offered menu of contracts.