Bridging the Linear-Quadratic Gap: A Quantum-Classical Hybrid Approach to Robust Supply Chain Design
AIONOS
Abstract
The design of supply chain networks in densely populated urban logistics systems faces a timely dilemma: the traditional optimisation approaches are effective to maximise the level of demand perfusion, but they are limited to embracing large expenses in overlapping the facilities and cannibalisation in the market. When tested on a high-fidelity digital twin of the Delhi NCR road network of thirty candidate sites, we establish that Classical Greedy algorithms using the theoretical maximum demand of (473 units) lack any theoretical overlap penalty, but incur a prohibitive overlap penalty (5.08). Here, in comparison, the Quantum-Inspired solution only losses 3.2% of demand (450 compared to 465 units relative to the optimal solution), but the solution preserves 21.8% less operational overlap risk (3.26 compared to 4.17), which can be viewed as a 35.8% improvement compared to the Greedy solution. Geospatial analysis shows that it can be attributed to a shift in strategies: This, in contrast to Classical approaches, which focus on locating facilities in the high-density central areas (North/Central Delhi), the quantum-inspired solver autonomously chooses the diversified topology of the North-south network, penetrating into the underserved periphery growth markets. This is a spatially balanced arrangement which is congruent to the polycentric structure of modern time megacities, and displays better stability to volatility in demand. We have shown that quantum-inspired optimisation methods can close the so-called Linear-Quadratic Gap phenomenon, i.e. the systematic inability of greedy methods to capture the actual quadratic interactions between facilities, and offer a way of computing the pathway to operationally robust and risk-optimised supply chain networks in dense urban conditions.
The design of supply chain networks in densely populated urban logistics systems faces a timely dilemma: the traditional optimisation approaches are effective to maximise the level of demand perfusion, but they are limited to embracing large expenses in overlapping the facilities and cannibalisation in the market. When tested on a high-fidelity digital twin of the Delhi NCR road network of thirty candidate sites, we establish that Classical Greedy algorithms using the theoretical maximum demand of (473 units) lack any theoretical overlap penalty, but incur a prohibitive overlap penalty (5.08). Here, in comparison, the Quantum-Inspired solution only losses 3.2% of demand (450 compared to 465 units relative to the optimal solution), but the solution preserves 21.8% less operational overlap risk (3.26 compared to 4.17), which can be viewed as a 35.8% improvement compared to the Greedy solution. Geospatial analysis shows that it can be attributed to a shift in strategies: This, in contrast to Classical approaches, which focus on locating facilities in the high-density central areas (North/Central Delhi), the quantum-inspired solver autonomously chooses the diversified topology of the North-south network, penetrating into the underserved periphery growth markets. This is a spatially balanced arrangement which is congruent to the polycentric structure of modern time megacities, and displays better stability to volatility in demand. We have shown that quantum-inspired optimisation methods can close the so-called Linear-Quadratic Gap phenomenon, i.e. the systematic inability of greedy methods to capture the actual quadratic interactions between facilities, and offer a way of computing the pathway to operationally robust and risk-optimised supply chain networks in dense urban conditions.
Why we are recommending this paper?
Due to your Interest in Supply Chain
This paper directly addresses supply chain design, a core interest, and proposes a novel approach using quantum-classical hybrid methods – a sophisticated technique relevant to optimization challenges within the supply chain domain. Given the focus on robust design, this work aligns well with the need for resilient and efficient supply chain strategies.
Due to your Interest in Supply Chain
This paper directly addresses supply chain design, a core interest, and proposes a novel approach using quantum-classical hybrid methods – a sophisticated technique relevant to optimization challenges within the supply chain domain. Given the focus on robust design, this work aligns well with the need for resilient and efficient supply chain strategies.
Chicago State University
AI Insights
- The study relies heavily on historical data, which may not reflect current market trends or conditions. [3]
- The paper discusses the application of machine learning in supply chain management, specifically in predicting inventory levels and demand forecasting. [2]
Abstract
Demand forecasting in supply chain management (SCM) is critical for optimizing inventory, reducing waste, and improving customer satisfaction. Conventional approaches frequently neglect external influences like weather, festivities, and equipment breakdowns, resulting in inefficiencies. This research investigates the use of machine learning (ML) algorithms to improve demand prediction in retail and vending machine sectors. Four machine learning algorithms. Extreme Gradient Boosting (XGBoost), Autoregressive Integrated Moving Average (ARIMA), Facebook Prophet (Fb Prophet), and Support Vector Regression (SVR) were used to forecast inventory requirements. Ex-ternal factors like weekdays, holidays, and sales deviation indicators were methodically incorporated to enhance precision. XGBoost surpassed other models, reaching the lowest Mean Absolute Error (MAE) of 22.7 with the inclusion of external variables. ARIMAX and Fb Prophet demonstrated noteworthy enhancements, whereas SVR fell short in performance. Incorporating external factors greatly improves the precision of demand forecasting models, and XGBoost is identified as the most efficient algorithm. This study offers a strong framework for enhancing inventory management in retail and vending machine systems.
Demand forecasting in supply chain management (SCM) is critical for optimizing inventory, reducing waste, and improving customer satisfaction. Conventional approaches frequently neglect external influences like weather, festivities, and equipment breakdowns, resulting in inefficiencies. This research investigates the use of machine learning (ML) algorithms to improve demand prediction in retail and vending machine sectors. Four machine learning algorithms. Extreme Gradient Boosting (XGBoost), Autoregressive Integrated Moving Average (ARIMA), Facebook Prophet (Fb Prophet), and Support Vector Regression (SVR) were used to forecast inventory requirements. Ex-ternal factors like weekdays, holidays, and sales deviation indicators were methodically incorporated to enhance precision. XGBoost surpassed other models, reaching the lowest Mean Absolute Error (MAE) of 22.7 with the inclusion of external variables. ARIMAX and Fb Prophet demonstrated noteworthy enhancements, whereas SVR fell short in performance. Incorporating external factors greatly improves the precision of demand forecasting models, and XGBoost is identified as the most efficient algorithm. This study offers a strong framework for enhancing inventory management in retail and vending machine systems.
Why we are recommending this paper?
Due to your Interest in AI for Supply Chain
This research tackles inventory optimization, a key area within supply chain management, by leveraging data-driven models and incorporating external factors. The focus on context-augmented machine learning aligns with the need to improve forecasting accuracy and reduce waste, directly addressing the user's interests.
Due to your Interest in AI for Supply Chain
This research tackles inventory optimization, a key area within supply chain management, by leveraging data-driven models and incorporating external factors. The focus on context-augmented machine learning aligns with the need to improve forecasting accuracy and reduce waste, directly addressing the user's interests.
Institute for Applied Economic Research IPEA Brazil
Abstract
This paper examines the European Union's emerging regulatory landscape - focusing on the AI Act, corporate sustainability reporting and due diligence regimes (CSRD and CSDDD), and data center regulation - to assess whether it can effectively govern AI's environmental footprint. We argue that, despite incremental progress, current approaches remain ill-suited to correcting the market failures underpinning AI-related energy use, water consumption, and material demand. Key shortcomings include narrow disclosure requirements, excessive reliance on voluntary standards, weak enforcement mechanisms, and a structural disconnect between AI-specific impacts and broader sustainability laws. The analysis situates these regulatory gaps within a wider ecosystem of academic research, civil society advocacy, standard-setting, and industry initiatives, highlighting risks of regulatory capture and greenwashing. Building on this diagnosis, the paper advances strategic recommendations for the COP30 Action Agenda, calling for binding transparency obligations, harmonized international standards for lifecycle assessment, stricter governance of data center expansion, and meaningful public participation in AI infrastructure decisions.
This paper examines the European Union's emerging regulatory landscape - focusing on the AI Act, corporate sustainability reporting and due diligence regimes (CSRD and CSDDD), and data center regulation - to assess whether it can effectively govern AI's environmental footprint. We argue that, despite incremental progress, current approaches remain ill-suited to correcting the market failures underpinning AI-related energy use, water consumption, and material demand. Key shortcomings include narrow disclosure requirements, excessive reliance on voluntary standards, weak enforcement mechanisms, and a structural disconnect between AI-specific impacts and broader sustainability laws. The analysis situates these regulatory gaps within a wider ecosystem of academic research, civil society advocacy, standard-setting, and industry initiatives, highlighting risks of regulatory capture and greenwashing. Building on this diagnosis, the paper advances strategic recommendations for the COP30 Action Agenda, calling for binding transparency obligations, harmonized international standards for lifecycle assessment, stricter governance of data center expansion, and meaningful public participation in AI infrastructure decisions.
Why we are recommending this paper?
Due to your Interest in AI for Supply Chain
Considering the increasing interest in sustainable practices within supply chains, this paper's examination of AI regulation and its environmental impact is highly relevant. Understanding the regulatory landscape surrounding AI is crucial for responsible and sustainable supply chain design.
Due to your Interest in AI for Supply Chain
Considering the increasing interest in sustainable practices within supply chains, this paper's examination of AI regulation and its environmental impact is highly relevant. Understanding the regulatory landscape surrounding AI is crucial for responsible and sustainable supply chain design.
Prince Sultan University
AI Insights
- The paper discusses the concept of agentic AI, which refers to AI systems that can make decisions and take actions on their own without human intervention. [3]
- Autonomous agent: An AI system that can operate independently and make decisions based on its internal state and external environment. [3]
- Agentic AI is a rapidly growing field with various applications, including scientific discovery, language translation, and task management. [2]
Abstract
The evolution of Large Language Models (LLMs) from passive text generators to autonomous, goal-driven systems represents a fundamental shift in artificial intelligence. This chapter examines the emergence of agentic AI systems that integrate planning, memory, tool use, and iterative reasoning to operate autonomously in complex environments. We trace the architectural progression from statistical models to transformer-based systems, identifying capabilities that enable agentic behavior: long-range reasoning, contextual awareness, and adaptive decision-making. The chapter provides three contributions: (1) a synthesis of how LLM capabilities extend toward agency through reasoning-action-reflection loops; (2) an integrative framework describing core components perception, memory, planning, and tool execution that bridge LLMs with autonomous behavior; (3) a critical assessment of applications and persistent challenges in safety, alignment, reliability, and sustainability. Unlike existing surveys, we focus on the architectural transition from language understanding to autonomous action, emphasizing the technical gaps that must be resolved before deployment. We identify critical research priorities, including verifiable planning, scalable multi-agent coordination, persistent memory architectures, and governance frameworks. Responsible advancement requires simultaneous progress in technical robustness, interpretability, and ethical safeguards to realize potential while mitigating risks of misalignment and unintended consequences.
The evolution of Large Language Models (LLMs) from passive text generators to autonomous, goal-driven systems represents a fundamental shift in artificial intelligence. This chapter examines the emergence of agentic AI systems that integrate planning, memory, tool use, and iterative reasoning to operate autonomously in complex environments. We trace the architectural progression from statistical models to transformer-based systems, identifying capabilities that enable agentic behavior: long-range reasoning, contextual awareness, and adaptive decision-making. The chapter provides three contributions: (1) a synthesis of how LLM capabilities extend toward agency through reasoning-action-reflection loops; (2) an integrative framework describing core components perception, memory, planning, and tool execution that bridge LLMs with autonomous behavior; (3) a critical assessment of applications and persistent challenges in safety, alignment, reliability, and sustainability. Unlike existing surveys, we focus on the architectural transition from language understanding to autonomous action, emphasizing the technical gaps that must be resolved before deployment. We identify critical research priorities, including verifiable planning, scalable multi-agent coordination, persistent memory architectures, and governance frameworks. Responsible advancement requires simultaneous progress in technical robustness, interpretability, and ethical safeguards to realize potential while mitigating risks of misalignment and unintended consequences.
Why we are recommending this paper?
Due to your Interest in AI for Pricing
This paper explores agentic AI systems, which are increasingly seen as a potential tool for automating and optimizing complex supply chain processes. The focus on planning, memory, and tool use aligns with the desire to leverage AI for intelligent decision-making within supply chains.
Due to your Interest in AI for Pricing
This paper explores agentic AI systems, which are increasingly seen as a potential tool for automating and optimizing complex supply chain processes. The focus on planning, memory, and tool use aligns with the desire to leverage AI for intelligent decision-making within supply chains.
Oklahoma State University
Abstract
AI shopping agents are being deployed to hundreds of millions of consumers, creating a new intermediary between platforms, sellers, and buyers. We identify a novel market failure: vertical tacit collusion, where platforms controlling rankings and sellers controlling product descriptions independently learn to exploit documented AI cognitive biases. Using multi-agent simulation calibrated to empirical measurements of large language model biases, we show that joint exploitation produces consumer harm more than double what would occur if strategies were independent. This super-additive harm arises because platform ranking determines which products occupy bias-triggering positions while seller manipulation determines conversion rates. Unlike horizontal algorithmic collusion, vertical tacit collusion requires no coordination and evades antitrust detection because harm emerges from aligned incentives rather than agreement. Our findings identify an urgent regulatory gap as AI shopping agents reach mainstream adoption.
AI shopping agents are being deployed to hundreds of millions of consumers, creating a new intermediary between platforms, sellers, and buyers. We identify a novel market failure: vertical tacit collusion, where platforms controlling rankings and sellers controlling product descriptions independently learn to exploit documented AI cognitive biases. Using multi-agent simulation calibrated to empirical measurements of large language model biases, we show that joint exploitation produces consumer harm more than double what would occur if strategies were independent. This super-additive harm arises because platform ranking determines which products occupy bias-triggering positions while seller manipulation determines conversion rates. Unlike horizontal algorithmic collusion, vertical tacit collusion requires no coordination and evades antitrust detection because harm emerges from aligned incentives rather than agreement. Our findings identify an urgent regulatory gap as AI shopping agents reach mainstream adoption.
Why we are recommending this paper?
Due to your Interest in AI for Pricing
This research investigates a novel market failure – vertical tacit collusion – within AI-mediated markets, a growing area of concern for supply chain dynamics. Understanding these market failures is essential for designing more transparent and competitive supply chains.
Due to your Interest in AI for Pricing
This research investigates a novel market failure – vertical tacit collusion – within AI-mediated markets, a growing area of concern for supply chain dynamics. Understanding these market failures is essential for designing more transparent and competitive supply chains.
University of DuisburgEssen
Abstract
Precise day-ahead forecasts for electricity prices are crucial to ensure efficient portfolio management, support strategic decision-making for power plant operations, enable efficient battery storage optimization, and facilitate demand response planning. However, developing an accurate prediction model is highly challenging in an uncertain and volatile market environment. For instance, although linear models generally exhibit competitive performance in predicting electricity prices with minimal computational requirements, they fail to capture relevant nonlinear relationships. Nonlinear models, on the other hand, can improve forecasting accuracy with a surge in computational costs. We propose a novel multivariate neural network approach that combines linear and nonlinear feed-forward neural structures. Unlike previous hybrid models, our approach integrates online learning and forecast combination for efficient training and accuracy improvement. It also incorporates all relevant characteristics, particularly the fundamental relationships arising from wind and solar generation, electricity demand patterns, related energy fuel and carbon markets, in addition to autoregressive dynamics and calendar effects. Compared to the current state-of-the-art benchmark models, the proposed forecasting method significantly reduces computational cost while delivering superior forecasting accuracy (12-13% RMSE and 15-18% MAE reductions). Our results are derived from a six-year forecasting study conducted on major European electricity markets.
Precise day-ahead forecasts for electricity prices are crucial to ensure efficient portfolio management, support strategic decision-making for power plant operations, enable efficient battery storage optimization, and facilitate demand response planning. However, developing an accurate prediction model is highly challenging in an uncertain and volatile market environment. For instance, although linear models generally exhibit competitive performance in predicting electricity prices with minimal computational requirements, they fail to capture relevant nonlinear relationships. Nonlinear models, on the other hand, can improve forecasting accuracy with a surge in computational costs. We propose a novel multivariate neural network approach that combines linear and nonlinear feed-forward neural structures. Unlike previous hybrid models, our approach integrates online learning and forecast combination for efficient training and accuracy improvement. It also incorporates all relevant characteristics, particularly the fundamental relationships arising from wind and solar generation, electricity demand patterns, related energy fuel and carbon markets, in addition to autoregressive dynamics and calendar effects. Compared to the current state-of-the-art benchmark models, the proposed forecasting method significantly reduces computational cost while delivering superior forecasting accuracy (12-13% RMSE and 15-18% MAE reductions). Our results are derived from a six-year forecasting study conducted on major European electricity markets.
Why we are recommending this paper?
Due to your Interest in AI for Pricing Optimization
Due to your Interest in AI for Pricing Optimization
Waseda University
Abstract
Improvements in return forecast accuracy do not always lead to proportional improvements in portfolio decision quality, especially under realistic trading frictions and constraints. This paper adopts the Smart Predict--then--Optimize (SPO) paradigm for portfolio optimization in real markets, which explicitly aligns the learning objective with downstream portfolio decision quality rather than pointwise prediction accuracy. Within this paradigm, predictive models are trained using an SPO-based surrogate loss that directly reflects the performance of the resulting investment decisions. To preserve interpretability and robustness, we employ linear predictors built on return-based and technical-indicator features and integrate them with portfolio optimization models that incorporate transaction costs, turnover control, and regularization. We evaluate the proposed approach on U.S. ETF data (2015--2025) using a rolling-window backtest with monthly rebalancing. Empirical results show that decision-focused training consistently improves risk-adjusted performance over predict--then--optimize baselines and classical optimization benchmarks, and yields strong robustness during adverse market regimes (e.g., the 2020 COVID-19). These findings highlight the practical value of the Smart Predict--then--Optimize paradigm for portfolio optimization in realistic and non-stationary financial environments.
Improvements in return forecast accuracy do not always lead to proportional improvements in portfolio decision quality, especially under realistic trading frictions and constraints. This paper adopts the Smart Predict--then--Optimize (SPO) paradigm for portfolio optimization in real markets, which explicitly aligns the learning objective with downstream portfolio decision quality rather than pointwise prediction accuracy. Within this paradigm, predictive models are trained using an SPO-based surrogate loss that directly reflects the performance of the resulting investment decisions. To preserve interpretability and robustness, we employ linear predictors built on return-based and technical-indicator features and integrate them with portfolio optimization models that incorporate transaction costs, turnover control, and regularization. We evaluate the proposed approach on U.S. ETF data (2015--2025) using a rolling-window backtest with monthly rebalancing. Empirical results show that decision-focused training consistently improves risk-adjusted performance over predict--then--optimize baselines and classical optimization benchmarks, and yields strong robustness during adverse market regimes (e.g., the 2020 COVID-19). These findings highlight the practical value of the Smart Predict--then--Optimize paradigm for portfolio optimization in realistic and non-stationary financial environments.
Why we are recommending this paper?
Due to your Interest in AI for Pricing Optimization
Due to your Interest in AI for Pricing Optimization
Universit e ParisSaclay, CentraleSup elec
Abstract
We study the optimal liquidation of a large position on Uniswap v2 and Uniswap v3 in discrete time. The instantaneous price impact is derived from the AMM pricing rule. Transient impact is modeled to capture either exponential or approximately power-law decay, together with a permanent component. In the Uniswap v2 setting, we obtain optimal strategies in closed-form under general price dynamics. For Uniswap v3, we consider a two-layer liquidity framework, which naturally extends to multiple layers. We address the problem using dynamic programming under geometric Brownian motion dynamics and approximate the solution numerically using a discretization scheme. We obtain optimal strategies akin to classical ones in the LOB literature, with features specific to Uniswap. In particular, we show how the liquidity profile influences them.
We study the optimal liquidation of a large position on Uniswap v2 and Uniswap v3 in discrete time. The instantaneous price impact is derived from the AMM pricing rule. Transient impact is modeled to capture either exponential or approximately power-law decay, together with a permanent component. In the Uniswap v2 setting, we obtain optimal strategies in closed-form under general price dynamics. For Uniswap v3, we consider a two-layer liquidity framework, which naturally extends to multiple layers. We address the problem using dynamic programming under geometric Brownian motion dynamics and approximate the solution numerically using a discretization scheme. We obtain optimal strategies akin to classical ones in the LOB literature, with features specific to Uniswap. In particular, we show how the liquidity profile influences them.
Why we are recommending this paper?
Due to your Interest in Pricing
Due to your Interest in Pricing
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