Blockchain-empowered Newsvendor optimization

Jasmine (Aichih) Chang, Michael N. Katehakis, Jim (Junmin) Shi, Zhipeng Yan

Research output: Contribution to journalArticlepeer-review

Abstract

Technology has been widely adopted as a backbone for supply chain management, especially in the context of retailing. For example, Blockchain Technology (BCT) has been embraced as a disruptive technology, though it is still in a nascent stage. This study examines the technology adoption for Newsvendor model (a.k.a Newsboy), as exemplified by a blockchain system. It aims to shed light on how BCT adoption impacts the optimal ordering decisions and the corresponding optimal profit. Importantly, we investigate the optimal adoption of technology for profit optimization while considering the adoption cost. As a result, we visualize how technology adoption shifts the curve. For some selected demand types (e.g., Uniform and Normal distributions) and the Cobb-Douglas cost function, we derive closed-form expressions for the optimal decisions, based on which some useful insights have been developed. Although high adoption of BCT leads to higher demand and lower ordering cost, some counter-intuitive examples have been devised to reveal that the increase in adoption degree might lower the optimal order quantity and it is not always profitable to adopt a higher BCT even if there is no adoption cost. Finally, a sequence of numerical studies complements our analytical results with rich and useful insights.

Original languageEnglish (US)
Article number108144
JournalInternational Journal of Production Economics
Volume238
DOIs
StatePublished - Aug 2021

All Science Journal Classification (ASJC) codes

  • Business, Management and Accounting(all)
  • Economics and Econometrics
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering

Keywords

  • Blockchain
  • Newsvendor
  • Stochastic monotonicity
  • Tech-savvy consumers
  • Technology adoption

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