Inventory outsourcing and risk management

Charles S. Tapiero, Alberto Grando

Research output: Chapter in Book/Report/Conference proceedingConference contribution


This paper considers the "inventory outsourcing problem" as a VaR (Value at Risk) problem providing a mechanism for managing outsourcing firms when the supplier is a leader having full information of the outsourcing firm's demand distributions and cost parameters. This leads to a Stackleberg game which is solved under a number of assumptions. Both demand dependent and independent models are considered, the latter resulting from (statistical) risk aggregation. A number of examples are solved as well to highlight essential issues underlying the practice of inventory outsourcing-price and supply priorities. These solutions can be be expressed as nonlinear optimization problems which can be solved by standard numerical routines.

Original languageEnglish (US)
Title of host publicationProceedings of the 16th IFAC World Congress, IFAC 2005
PublisherIFAC Secretariat
Number of pages5
ISBN (Print)008045108X, 9780080451084
StatePublished - 2005

Publication series

NameIFAC Proceedings Volumes (IFAC-PapersOnline)
ISSN (Print)1474-6670


  • Inventory control
  • Production systems
  • Uncertainty

ASJC Scopus subject areas

  • Control and Systems Engineering


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