Prof. Jason Choi
ITC congratulates Prof. Jason Choi for the recent publication of his paper in Production and Operations Management, a premier business journal that is listed in all major business school journal lists (for example, The University of Texas at Dallas (UTD) journal list, Financial Times Top 50 Journals list, Business Week list, etc.).
The paper is based on research on supply chain management with risk considerations, which is an important research area that is especially relevant to supply chains that produce and sell short-life fashion products. In the literature, the classical newsvendor model is often used to explore inventory management problems in supply chains that sell short-life fashionable and seasonal products. The standard newsvendor problem seeks to minimize the expected inventory cost or maximize the expected profit. However, optimizing an expected value alone does not fully capture the stochastic nature of the newsvendor problem. Inspired by the Nobel prize winning mean-variance theory in economic sciences and the higher-moment analyses explored in the finance literature, Professor Choi and his co-authors theoretically conduct a mean-variance-skewness-kurtosis (MVSK) analysis for the newsvendor problem. They first derive the analytical expressions for the mean, variance, skewness, and kurtosis of profit in a standard newsvendor setting and reveal their structural properties. They then establish various MVSK optimization problems and find the solution to each of them. They show that kurtosis aversion always causes the newsvendor to order less, while skewness seeking can cause the newsvendor to order either more or less depending on the specific structure of the profit’s skewness, which is affected by the symmetric and asymmetric properties of the demand distribution. Finally, they address the challenges of supply chain coordination based on the Pareto optimality concept. They reveal that considering the MVSK preferences of supply chain agents will significantly affect the achievability of supply chain coordination and flexibility of the coordinating contract.
Zhang, J., S.P. Sethi, T.M. Choi*, T.C.E. Cheng. 2020. Supply Chains Involving a Mean-Variance-Skewness-Kurtosis Newsvendor: Analysis and Coordination. Production and Operations Management 29(6), 1397-1430. https://doi.org/10.1111/poms.13159
