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Methods of Risk Pooling in Business Logistics and Their Application

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Methods of Risk Pooling in Business Logistics and Their Application Methods of Risk Pooling in Business Logistics and Their Application I n a u g u r a l d i s s e r t a t i o n zur Erlangung des akademischen Grades „Doktor der Wirtschaftswissenschaften“ (Dr. rer. pol.) eingereicht an der Wirtschaftswissenschaftlichen Fakultät der Europa-Universität Viadrina in Frankfurt (Oder) im September 2010 von Gerald Oeser Frankfurt (Oder) “Uncertainty is the only certainty there is, and knowing how to live with insecurity is the only security.” John Allen Paulos, Professor of Mathematics at Temple University in Philadelphia To my brother, who never failed to support me Acknowledgements First and foremost I would like to express my gratitude to my Ph.D. advisor Prof. Dr. Dr. h.c. Knut Richter, Chair of General Business Administration, especially Industrial Management, European University Viadrina Frankfurt (Oder), Germany for his extensive mentoring. He also kindly gave me the opportunity of gaining experience in teaching grad- uate courses in addition to my research. For willingly delivering his expert opinion on my thesis as the second referee I thank Prof. Dr. Joachim Käschel, Professorship of Production and Industrial Management, Tech- nical University Chemnitz, Germany very much. I would also like to gratefully acknowledge the support of all employees of Prof. Rich- ter's chair, especially Dr. Grigory Pishchulov: Among other things, he helped me carry out the “Subadditivity Proof for the Order Quantity Function (5.1)” in Appendix E mathemati- cally formally correctly. Furthermore, I thank Prof. Dr. Dr. h.c. Werner Delfmann, Director of the Department of Business Policy and Logistics, University of Cologne, Germany for the opportunity offered and for showing me that the world cannot be explained by mathematics alone. Moreover, I appreciate the diverse support of the following professors during my Mas- ter's and doctoral studies: Ravi M. Anupindi (University of Michigan), Ronald H. Ballou (Case Western Reserve University), Gérard Cachon (University of Pennsylvania), Ian Caddy (University of Western Sydney, Australia), Sunil Chopra (Northwestern Universi- ty), Chandrasekhar Das (emeritus, University of Northern Iowa), David Dilts (Oregon Health and Science University), Bruno Durand (University of Nantes, France), Philip T. Evers (University of Maryland), Amit Eynan (University of Richmond), Dieter Feige (emeritus, University of Nuremberg, Germany), Jaime Alonso Gomez (EGADE - Tec de Monterrey, Mexico City and University of San Diego), Drummond Kahn (University of Oregon), Peter Köchel (emeritus, Technical University Chemnitz, Germany), David H. Maister (formerly Harvard Business School), Alan C. McKinnon (Heriot-Watt University, UK), Esmail Mohebbi (University of West Florida), Steven Nahmias (Santa Clara Univer- sity), Teofilo Ozuna, Jr. (The University of Texas-Pan American), David F. Pyke (Univer- sity of San Diego), Pietro Romano (University of Udine, Italy), Wolfgang Schmid (Euro- pean University Viadrina Frankfurt (Oder), Germany), Yossi Sheffi (Massachusetts Insti- tute of Technology), Edward Silver (emeritus, University of Calgary, Canada), Jacky Yuk- Chow So (University of Macau, China), Jayashankar M. Swaminathan (University of North Carolina), Christian Terwiesch (University of Pennsylvania), Ulrich Thonemann (University of Cologne, Germany), Biao Yang (University of York, UK), and Walter Zinn (The Ohio State University). I express gratitude to the paper merchant wholesaler Papierco for the insight into its op- erations, the opportunity of optimizing its logistics, and the financial support. I am also thankful to my friends: Without them writing this dissertation would have been a lonesome experience. Finally, I thank my father for constantly pushing and financially supporting me and proofreading my thesis. Geleitwort Die vorgelegte Dissertation widmet sich dem großen Thema Risk Pooling in der Business- Logistik. Die Aggregation von Risiken der Logistikprozesse ist ein derart universelles Problem, so dass Autoren verschiedenster Wissenschafts- und Anwendungsgebiete dazu ihre Positionen, Lösungsansätze und Modelle dargestellt haben. Bisher hatte noch niemand den Mut aufgebracht, diese kaum überblickbare Menge an Literaturquellen zu sichten und nach wissenschaftlichen Kriterien zu ordnen. Herr Oeser hat sich dieser Aufgabe gestellt und hat sie mit Bravour gemeistert. Bei aller Bedeutung dieser aufwendigen akademischen Aktivitäten darf jedoch nicht ver- gessen werden, dass Risk Pooling ein Problem der Praxis ist, und dass die entsprechenden theoretischen Untersuchungen letztendlich der Praxis dienen sollen. Die Vielfältigkeit des Problems kann dabei kaum durch ein relevantes Basismodell erfasst werden. Es ist das Verdienst des Autors, mit der Entwicklung einer Grundkonzeption für ein Entscheidungs- unterstützungssystem zur Auswahl der geeigneten Risk Pooling Strategien Unternehmen und besonders Unternehmensberatungen ein Instrument in die Hand zu geben, mit dem sich die vielfältigen Situationen der Unternehmen analysieren lassen. Er belässt es jedoch nicht beim Entwurf der Konzeption, sondern demonstriert auch überzeugend dessen An- wendung anhand eines Unternehmens. Es ließen sich viele weitere Vorzüge des hier veröffentlichten Werkes nennen. Es soll an dieser Stelle jedoch dem Leser überlassen bleiben sich ein Urteil zu bilden. Herr Oeser bietet dem Leser mit seiner Dissertation auf jeden Fall keine „leichte Kost“, denn der be- handelte Gegenstand lässt eine oberflächliche Betrachtung nicht zu. Wer sollte dieses Werk lesen? Wissenschaftler und Studenten aus den Gebieten Operations Management, Logistik, Operations Research werden hier viel Neues und Interessantes, auch viele Probleme für die weitere Forschung finden. Unternehmensberatungen werden viele angeführte Lösungen zur Komplexitätsbewältigung in ihren Projekten anwenden können. Ich bin überzeugt, dass die vorgelegte Dissertation neue Forschungen und Projekte anregen wird. Das ist das Schönste, was sich ein Autor wohl wünschen kann. Prof. Dr. Dr. h.c. Knut Richter Table of Contents List of Figures .................................................................................................................... X List of Tables ..................................................................................................................... XI List of Abbreviations, Signs, and Symbols ................................................................... XII Abstract ................................................................................................................... XIV 1 Introduction ................................................................................................. 1 1.1 Problem: Growing Uncertainty in Business Logistics and Need for a Tool to Choose Among Risk Pooling Countermeasures ............ 1 1.2 Objective ....................................................................................................... 3 1.3 Object and Method ........................................................................................ 3 1.4 Structure and Contents .................................................................................. 4 2 Risk Pooling in Business Logistics ............................................................. 6 2.1 Business Logistics Risk Pooling Research ................................................... 6 2.2 Placing Risk Pooling in the Supply Chain, Business Logistics, and a Value Chain ......................................................................................... 8 2.3 Defining Risk Pooling ................................................................................. 11 2.4 Explaining Risk Pooling ............................................................................. 14 2.5 Characteristics of Risk Pooling ................................................................... 19 3 Methods of Risk Pooling ........................................................................... 24 3.1 Storage: Inventory Pooling ......................................................................... 27 3.2 Transportation ............................................................................................. 35 3.2.1 Virtual Pooling ............................................................................................ 35 3.2.2 Transshipments ........................................................................................... 35 3.3 Procurement ................................................................................................ 40 3.3.1 Centralized Ordering ................................................................................... 40 3.3.2 Order Splitting ............................................................................................ 41 3.4 Production ................................................................................................... 43 3.4.1 Component Commonality ........................................................................... 43 3.4.2 Postponement .............................................................................................. 45 3.4.3 Capacity Pooling ......................................................................................... 49 VII Table of Contents 3.5 Sales and Distribution ................................................................................. 51 3.5.1 Product Pooling ........................................................................................... 51 3.5.2 Product Substitution ...................................................................................
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