bluuebunny/crossref_metadata_2025 huggingface dataset:
The Value of Resource Flexibility in the Resource-Constrained Job Assignment Problem
Authors: Vairaktarakis George L.
Published: December 2003

We consider the problem of minimizing project duration in an environment where each project activity can be executed by a number of different flexible resources. The capabilities of the flexible resources are modeled using a binary activity-resource matrixAcalled theavailabilitymatrix. Activity durations are known deterministically. We develop tight lower bounds and a variety of heuristics accompanied with extensive computational tests regarding their performance. It is shown that our algorithms consistently perform near optimally. Using these heuristics, we perform experiments on the effect of operating flexibility on project duration, where resource flexibility is measured by the number of resources available per activity, and the form of the availability matrixA. Our experiments lead to important managerial guidelines regarding the role of resource flexibility on project duration. For instance, it is found that when the flexible capabilities of the resources are evenly distributed across the activities, small improvements in resource flexibilities provide nearly the same benefits in project duration as a system of fully flexible resources.
Overcoming Local Search Through Alliances and Mobility
Authors: Rosenkopf Lori , Almeida Paul
Published: December 2003

Recent research suggests that, due to organizational and relational constraints, firms are limited contextually—both geographically and technologically—in their search for new knowledge. But distant contexts may offer ideas and insights that can be extremely useful to innovation through knowledge recombination. So how can firms reach beyond their existing contexts in their search for new knowledge? In this paper, we suggest that two mechanisms—alliances and the mobility of inventors—can serve as bridges to distant contexts and, thus, enable firms to overcome the constraints of contextually localized search.

Through the analysis of patent citation patterns in the semiconductor industry, we first demonstrate both the geographic and technological localization of knowledge. We then explore if the formation of alliances and mobility of active inventors facilitate interfirm knowledge flows across contexts. We find that mobility is associated with interfirm knowledge flows regardless of geographic proximity and, in fact, the usefulness of alliances and mobility increases with technological distance. These findings suggest that firms can employ knowledge acquisition mechanisms to fill in the holes of their existing technological and geographic context.
Customer Satisfaction in Virtual Environments: A Study of Online Investing
Authors: Balasubramanian Sridhar , Konana Prabhudev , Menon Nirup M.
Published: December 2003

Many firms are moving to make virtual interfaces their primary, or even sole, points of customer contact. In this environment, some traditional service quality dimensions that determine customer satisfaction, such as the physical appearance of facilities, employees, and equipment, and employees' responsiveness and empathy are unobservable. In contrast, trust may play a central role here in enhancing customer satisfaction. We model trust as an endogenously formed entity that ultimately impacts customer satisfaction, and we elucidate the linkages between trust and other factors related to the performance of the online service provider and to the service environment. The model is validated using two samples—one comprising 225 online investors of a large online broker, and the other comprising 203 members of the American Association of Individual Investors (AAII). The findings suggest that perceived trustworthiness of an online broker is a significant antecedent to investors' satisfaction, and that perceived environmental security and perceived operational competence impact the formation of trust. The results have important managerial implications.
Process Flexibility in Supply Chains
Authors: Graves Stephen C. , Tomlin Brian T.
Published: December 2003

Process flexibility, whereby a production facility can produce multiple products, is a critical design consideration in multiproduct supply chains facing uncertain demand. The challenge is to determine a cost-effective flexibility configuration that is able to meet the demand with high likelihood. In this paper, we present a framework for analyzing the benefits from flexibility in multistage supply chains. We find two phenomena, stage-spanning bottlenecks and floating bottlenecks, neither of which are present in single-stage supply chains, which reduce the effectiveness of a flexibility configuration. We develop a flexibility measure g and show that increasing this measure results in greater protection from these supply-chain inefficiencies. We also identify flexibility guidelines that perform very well for multistage supply chains. These guidelines employ and adapt the single-stage chaining strategy of Jordan and Graves (1995) to multistage supply chains.
Product Customization and Price Competition on the Internet
Authors: Dewan Rajiv , Jing Bing , Seidmann Abraham
Published: December 2003

The Internet provides an unprecedented capability for sellers to learn about their customers and offer custom products at special prices. In addition, customization is more feasible today because of advances in manufacturing technologies that have improved sellers' manufacturing flexibility. We first develop a model of product customization and flexible pricing to incorporate the salient roles of the Internet and flexible manufacturing technologies in reducing the costs of designing and producing tailored consumer goods. We show how a monopoly seller may earn the highest profits by producing both standard and custom products and can raise prices for both types of products as customization and information collection technologies improve.

Simultaneous adoption of customization in a duopoly reduces the differentiation between their standard products but does not intensify price competition. Compared with a two-facility monopolist, the duopoly may underinvest in customization. Consumer surplus improves after sellers adopt customization but does not monotonically increase as customization technologies advance. When firms face a fixed entry cost and adopt customization sequentially, the first entrant always achieves an advantage and may be able to deter subsequent entry by choosing its customization scope strategically.
Group Decisions with Multiple Criteria
Authors: Baucells Manel , Sarin Rakesh K.
Published: December 2003

We consider a decision problem where a group of individuals evaluates multiattribute alternatives. We explore the minimal required agreements that are sufficient to specify the group utility function. A surprising result is that, under some conditions, a bilateral agreement among pairs of individuals on a single attribute is sufficient to derive the multiattribute group utility. The bilateral agreement between a pair of individuals could be on the weight of an attribute, on an attribute evaluation function, or on willingness to pay. We focus on the case in which each individual's utility function is additive. We show that the group utility can be represented as the weighted sum of group attribute weights and, more remarkably, of attribute evaluation functions. These group attribute evaluation functions are in turn weighted sums of individual attribute evaluation functions.
Constrained Discounted Markov Decision Processes and Hamiltonian Cycles
Authors: Feinberg Eugene A.
Published: December 2003

This paper establishes new links between stochastic and discrete optimization. We consider the following three problems for discrete time Markov Decision Processes with finite states and action sets: (i) find an optimal deterministic policy for a discounted problem with constraints, (ii) find an optimal stationary policy for a weighted discounted problem with constraints, (iii) find an optimal deterministic policy for a weighted discounted problem with constraints. We formulate mathematical programs for problems (i)–(iii) and show that the Hamiltonian Cycle Problem is a special case of each of these problems. Therefore problems (i)–(iii) are NP-hard. We also provide new mathematical programming formulations for the Hamiltonian Cycle and Traveling Salesman Problems.
A PTAS for Minimizing the Total Weighted Completion Time on Identical Parallel Machines
Authors: Skutella Martin , Woeginger Gerhard J.
Published: December 2003

We consider the problem of scheduling a set of n jobs on m identical parallel machines so as to minimize the weighted sum of job completion times. This problem is NP-hard in the strong sense. The best approximation result known so far was a [Formula: see text]-approximation algorithm that has been derived by Kawaguchi and Kyan back in 1986. The contribution of this paper is a polynomial time approximation scheme for this setting, which settles a problem that was open for a long time. Moreover, our result constitutes the first known approximation scheme for a strongly NP-hard scheduling problem with minsum objective.
Relaxed Most Negative Cycle and Most Positive Cut Canceling Algorithms for Minimum Cost Flow
Authors: Shigeno Maiko , Iwata Satoru , McCormick S. Thomas
Published: December 2003

This paper presents two new scaling algorithms for the minimum cost network flow problem, one a primal cycle canceling algorithm, the other a dual cut canceling algorithm. Both algorithms scale a relaxed optimality parameter, and create a second, inner relaxation. The primal algorithm uses the inner relaxation to cancel a most negative node-disjoint family of cycles w.r.t. the scaled parameter, the dual algorithm uses it to cancel most positive cuts w.r.t. the scaled parameter. We show that in a network with n nodes and m arcs, both algorithms need to cancel only O(mn) objects per scaling phase.

Furthermore, we show how to efficiently implement both algorithms to yield weakly polynomial running times that are as fast as any other cycle or cut canceling algorithms. Our algorithms have potential practical advantages compared to some other canceling algorithms as well.

Along the way, we give a comprehensive survey of cycle and cut canceling algorithms for min-cost flow. We also clarify the formal duality between cycles and cuts.
On Homogeneous Convex Cones, The Carathéodory Number, and the Duality Mapping
Authors: Tunçel Levent , Xu Song
Published: December 2003

Using three simple examples, we answer three questions related to homogeneous convex cones, the Carathéodory number of convex cones, and self-concordant barriers for convex cones. First, we show that, if the convex cone is not homogeneous, then the duality mapping does not have to be an involution. Next, we show that there are very elementary convex cones that are not homogeneous but have invariant Carathéodory number in the interior. Third, we show that the invariance of the Carathéodory number in the interior of the convex cone does not suffice to make the cone homogeneous even if the cone is self-dual. Finally, we characterize the Carathéodory number of epigraphs of matrix norms.
Improved Approximation Schemes for Scheduling Unrelated Parallel Machines
Authors: Jansen Klaus , Porkolab Lorant
Published: December 2003

We consider the problem of scheduling n independent jobs on m unrelated parallel machines where each job has to be processed by exactly one machine, processing job j on machine i requires pij time units, and the objective is to minimize the makespan, i.e., the maximum job completion time. Focusing on the case when m is fixed, we present for both preemptive and nonpreemptive variants of the problem fully polynomial approximation schemes whose running times depend only linearly on n. We also study an extension of the problem where processing job j on machine i incurs a cost of cij, and thus there are two optimization criteria: makespan and cost. We show that, for any fixed m, there is a fully polynomial approximation scheme that, given values T and C, computes for any fixed ε > 0 a schedule in 0(n) time with makespan at most (1 + ε)T and cost at most (1 + ε)C, if there exists a schedule of makespan T and cost C.
Fully Polynomial Approximation Schemes for Single-Item Capacitated Economic Lot-Sizing Problems
Authors: van Hoesel C. P. M. , Wagelmans A. P. M.
Published: December 2003

NP-hard cases of the single-item capacitated lot-sizing problem have been the topic of extensive research and continue to receive considerable attention. However, surprisingly few theoretical results have been published on approximation methods for these problems. To the best of our knowledge, until now no polynomial approximation method is known that produces solutions with a relative deviation from optimality that is bounded by a constant. In this paper we show that such methods do exist by presenting an even stronger result: the existence of fully polynomial approximation schemes. The approximation scheme is first developed for a quite general model, which has concave backlogging and production cost functions and arbitrary (monotone) holding cost functions. Subsequently we discuss important special cases of the model and extensions of the approximation scheme to even more general models.
Buffer Requirements and Server Ordering in a Tandem Queue with Correlated Service Times
Authors: Avi-Itzhak Benjamin , Levy Hanoch
Published: December 2003

We analyze the intermediate buffer requirements in a tandem queue where service times of each customer are deterministically correlated between the servers and arbitrarily distributed between customers. The major issue at hand is the determination of intermediate buffer sizes assuring no blocking when the arrivals pattern is arbitrary and unpredictable. The analysis shows that the worst arrival process is the Just-in-Time (JIT) process. Further, it shows that ordering of the servers with respect to service rates may be detrimental, and that the most vulnerable architectural design is that in which the servers have almost the same service rates. It is shown that the total buffer requirement in the system may be quite sensitive to the server ordering: A proper ordering requires just O(M) (where M is the number of queues) buffer size, while an improper ordering may require O(M2).
Computing Densities for Markov Chains via Simulation
Authors: Henderson Shane G. , Glynn Peter W.
Published: December 2003

We introduce a new class of density estimators, termed look-ahead density estimators, for performance measures associated with a Markov chain. Look-ahead density estimators are given for both transient and steady-state quantities. Look-ahead density estimators converge faster (especially in multidimensional problems) and empirically give visually superior results relative to more standard estimators, such as kernel density estimators. Several numerical examples that demonstrate the potential applicability of look-ahead density estimation are given.
Correlated Equilibrium in Quitting Games
Authors: Solan E. , Vohra R. V.
Published: December 2003

A quitting game is a sequential game where each player has two actions: to continue or to quit. The game continues as long as all players decide to continue. The moment at least one player decides to quit, the game terminates. The terminal payoff depends on the subset of players who quit at the terminating stage. If the game continues forever, then the payoff for the players is some fixed-payoff vector.

We prove that every quitting game admits a correlated uniform ε-equilibrium—a uniform ε-equilibrium in an extended game that includes a correlation device that sends one signal to each player before start of play.
On the Relation Among Some Definitions of Strategic Stability
Authors: Hillas John , Jansen Mathijs , Potters Jos , Vermeulen Dries
Published: December 2003

In this paper we examine a number of different definitions of strategic stability and the relations among them. In particular, we show that the stability requirement given by Hillas (1990) is weaker than the requirements involved in the various definitions of stability in Mertens' reformulation of stability (Mertens 1989, 1991). To this end, we introduce a new definition of stability and show that it is equivalent to (a variant of ) the definition given by Hillas (1990). We also use the equivalence of our new definition with the definition of Hillas to provide correct proofs of some of the results that were originally claimed (and incorrectly “proved”) in Hillas (1990).
Estimation of Derivatives of Nonsmooth Performance Measures in Regenerative Systems
Authors: Homem-de-Mello Tito
Published: December 2003

We investigate the problem of estimating derivatives of expected steady-state performance measures in parametric systems. Unlike most of the existing work in the area, we allow those functions to be nonsmooth and study the estimation of directional derivatives. For the class of regenerative Markovian systems we provide conditions under which we can obtain consistent estimators of those directional derivatives. An example illustrates that the conditions imposed must be different from those in the differentiable case. The result also allows us to derive necessary and sufficient conditions for differentiability of the expected steady-state function. We then analyze the process formed by the subdifferentials of the original process, and show that the subdifferential set of the expected steady-state function can be expressed as an average of integrals of multifunctions, which is the approach commonly found in the literature for integrals of sets. The latter result can also be viewed as a limit theorem for more general compact-convex multivalued processes.
A Relative Error Tolerance for a Family of Generalized Proximal Point Methods
Authors: Burachik Regina Sandra , Svaiter B. F.
Published: December 2003

We propose a new kind of inexact scheme for a family of generalized proximal point methods for the monotone complementarity problem. These methods, studied by Auslender, Teboulle, and Ben-Tiba, converge under the sole assumption of existence of solutions. We prove convergence of our new scheme and discuss its implementability.
How Stringent is the Linear Independence Assumption for Mathematical Programs with Complementarity Constraints?
Authors: Scholtes Stefan , Stöhr Michael
Published: December 2003

The linear independence constraint qualifications (LICQ) plays an important role in the analysis of mathematical programs with complementarity constraints (MPCCs) and is a vital ingredient to convergence analyses of SQP-type or smoothing methods, cf., e.g., Fukushima and Pang (1999), Luo et al. (1996), Scholtes and Stöhr (1999), Scholtes (2001), Stöhr (2000). We will argue in this paper that LICQ is not a particularly stringent assumption for MPCCs. Our arguments are based on an extension of Jongen's (1977) genericity analysis to MPCCs. His definitions of nondegenerate critical points and regular programs extend naturally to MPCCs and his genericity results generalize straightforwardly to MPCCs in standard form. An extension is not as straightforward for MPCCs with the particular structure induced by lower-level stationarity conditions for variational inequalities or optimization problems. We show that LICQ remains a generic property for this class of MPCCs.
A Characterization of Quality-Adjusted Life-Years Under Cumulative Prospect Theory
Authors: Bleichrodt Han , Miyamoto John
Published: December 2003

Quality-adjusted life-years (QALYs) are the most common utility measure in medical decision analysis and economic evaluations of health care. This paper presents an axiomatization of QALYs under cumulative prospect theory (CPT), currently the most influential model for decision under uncertainty. Because the set of health states need not be endowed with a natural topology that is connected, we first show how existing CPT characterizations can be extended to a class of outcome sets for which no connected natural topology is given. We then characterize QALY models with linear, power, and exponential utility for duration. Finally, we define loss aversion for multiattribute utility theory and characterize the QALY models under general and constant loss aversion. The measurement of QALYs belongs to the general field of multiattribute utility theory. Hence, our results can be generalized to other multiattribute decision contexts and they thereby contribute to the development of multiattribute utility theory under cumulative prospect theory.
Constraint Nondegeneracy in Variational Analysis
Authors: Robinson Stephen M.
Published: December 2003

This paper studies the sensitivity analysis of variational conditions defined over perturbed systems of finitely many nonlinear inequalities or equations, subject to additional fixed polyhedral constraints. If the system of constraints obeys a certain property called nondegeneracy, we show how to construct a local diffeomorphism of the feasible set to its tangent cone. Moreover, this diffeomorphism varies smoothly as the perturbation parameter changes.

The original variational condition is then locally equivalent to a variational inequality defined over this (polyhedral convex) tangent cone. This extends stability results already known for variational inequalities over polyhedral convex sets to a substantially more general case. We also show that existence, local uniqueness, and Lipschitz continuity, as well as B-differentiability of the solution, can all be predicted from a single affine variational inequality that is easily computable in terms of the data of the unperturbed problem at the point in question.
The Bilateral Consistent Prekernel, the Core, and NTU Bankruptcy Problems
Authors: Orshan Guni , Valenciano Federico , Zarzuelo José M.
Published: December 2003

It is shown that the bilateral consistent prekernel, an NTU solution concept that generalizes the Nash bargaining solution by means of a principle of bilateral consistency, is nonempty and intersects the core for a sufficiently rich class of NTU games: the class of boundary separating games, also introduced here. A second contribution of this paper is the NTU extension of the bankruptcy games introduced by Aumann and Maschler (1985). These games, which provide a new approach for dealing with bargaining problems with claims, are shown to be boundary separating, so that the results apply.
Matching Games: The Least Core and the Nucleolus
Authors: Kern Walter , Paulusma Daniël
Published: December 2003

A matching game is a cooperative game defined by a graph G = (N, E). The player set is N and the value of a coalition S ⫅ N is defined as the size of a maximum matching in the subgraph induced by S. We show that the nucleolus of such games can be computed efficiently. The result is based on an alternative characterization of the least core, which may be of independent interest. The general case of weighted matching games remains unsolved.
Integer Programming and Arrovian Social Welfare Functions
Authors: Sethuraman Jay , Piaw Teo Chung , Vohra Rakesh V.
Published: December 2003

We characterize the class of Arrovian Social Welfare Functions (ASWFs) as integer solutions to a collection of linear inequalities. Many of the classical possibility, impossibility, and characterization results can be derived in a simple and unified way from this integer program. Among the new results we derive is a characterization of preference domains that admit a nondictatorial, neutral ASWF. We also give a polyhedral characterization of all ASWFs on single-peaked domains.
An Algorithm to Identify and Compute Average Optimal Policies in Multichain Markov Decision Processes
Authors: Leizarowitz Arie
Published: December 2003

This paper concerns discrete-time, finite state multichain MDPs with compact action sets. The optimality criterion is long-run average cost. Simple examples illustrate that optimal stationary Markov policies do not always exist. We establish the existence of ε-optimal policies that are stationary Markovian, and develop an algorithm that computes these approximate optimal policies. We establish a necessary and sufficient condition for the existence of an optimal policy that is stationary Markovian, and in case that such an optimal policy exists the algorithm computes it.
On the Complexity of Computing Estimates of Condition Measures of a Conic Linear System
Authors: Freund Robert M. , Vera Jorge R.
Published: December 2003

Condition numbers based on the “distance to ill-posedness” ρ(d) have been shown to play a crucial role in the theoretical complexity of solving convex optimization models. In this paper, we present two algorithms and corresponding complexity analysis for computing estimates of ρ(d) for a finite-dimensional convex feasibility problem P(d) in standard primal form: find x that satisfies Ax = b, x ∈ CX, where d = (A, b) is the data for the problem P(d). Under one choice of norms for the m- and n-dimensional spaces, the problem of estimating ρ(d) is hard (co-NP complete even when CX = ℜn+). However, when the norms are suitably chosen, the problem becomes much easier: We can estimate ρ(d) to within a constant factor of its true value with complexity bounds that are linear in ln(C(d)) (where C(d) is the condition number of the data d for P(d)), plus other quantities that arise naturally in consideration of the problem P(d). The first algorithm is an interior-point algorithm, and the second algorithm is a variant of the ellipsoid algorithm. The main conclusion of this work is that when the norms are suitably chosen, computing an estimate of the condition measures of P(d) is essentially not much harder than computing a solution of P(d) itself.
An Interior-Point Perspective on Sensitivity Analysis in Semidefinite Programming
Authors: Yıldırım E. A.
Published: December 2003

We study the asymptotic behavior of the interior-point bounds arising from the work of Yıldırım and Todd on sensitivity analysis in semidefinite programming in comparison with the optimal partition bounds. We introduce a weaker notion of nondegeneracy and discuss its implications. For perturbations of the right-hand-side vector or the cost matrix, we show that the interior-point bounds evaluated on the central path using the Monteiro-Zhang family of search directions converge (as the duality gap tends to zero) to the symmetrized version of the optimal partition bounds under mild nondegeneracy assumptions. Furthermore, our analysis does not assume strict complementarity as long as the central path converges to the analytic center in a relatively controlled manner. We also show that the same convergence results carry over to iterates lying in an appropriate (very narrow) central path neighborhood if the Nesterov-Todd direction is used to evaluate the interior-point bounds. We extend our results to the case of simultaneous perturbations of the right-hand-side vector and the cost matrix. We also provide examples illustrating that our assumptions, in general, cannot be weakened.
Markov Decision Processes with Slow Scale Periodic Decisions
Authors: Jacobson M. , Shimkin N. , Shwartz A.
Published: December 2003

We consider a class of discrete time, dynamic decision-making models which we refer to as Periodically Time-Inhomogeneous Markov Decision Processes (PTMDPs). In these models, the decision-making horizon can be partitioned into intervals, called slow scale cycles, of N + 1 epochs. The transition law and reward function are time-homogeneous over the first N epochs of each slow scale cycle, but distinct at the final epoch. The motivation for such models is in applications where decisions of different nature are taken at different time scales, i.e., many “low-level” decisions are made between less frequent “high-level” ones.

For the PTMDP model, we consider the problem of optimizing the expected discounted reward when rewards devalue by a discount factor λ at the beginning of each slow scale cycle. When N is large, initially stationary policies (i.s.p.'s) are natural candidates for optimal policies. Similar to turnpike policies, an initially stationary policy uses the same decision rule for some large number of epochs in each slow scale cycle, followed by a relatively short planning horizon of time-varying decision rules. In this paper, we characterize the form of the optimal value as a function of N, establish conditions ensuring the existence of near-optimal i.s.p.'s, and characterize their structure. Our analysis deals separately with the cases where the time-homogeneous part of the system has state-dependent and state-independent optimal average reward. As we illustrate, the results in these two distinct cases are qualitatively different.
On Counting Integral Points in a Convex Rational Polytope
Authors: Lasserre Jean B. , Zeron Eduardo S.
Published: December 2003

Given a convex rational polytope Ω(b) ≔ {x ∈ ℝn+ | Ax = b}, we consider the function b ↦ f(b), which counts the nonnegative integral points of Ω(b). A closed form expression of its ℤ-transform z ↦ ℱ(z) is easily obtained so that f(b) can be computed as the inverse ℤ-transform of ℱ. We then provide two variants of an inversion algorithm. As a by-product, one of the algorithms provides the Ehrhart polynomial of a convex integer polytope Ω. We also provide an alternative that avoids the complex integration of ℱ(z) and whose main computational effort is to solve a linear system. This latter approach is particularly attractive for relatively small values of m, where m is the number of nontrivial constraints (or rows of A).
Lower Bound for the Number of Iterations in Semidefinite Hierarchies for the Cut Polytope
Authors: Laurent Monique
Published: December 2003

Hierarchies of semidefinite relaxations for 0/1 polytopes have been constructed by Lasserre (2001a) and by Lovász and Schrijver (1991). The cut polytope of a graph on n nodes can be expressed as a projection of such a semidefinite relaxation after at most n steps. We show that [n/2] iterations are needed for finding the cut polytope of the complete graph Kn.
Note On: N. E. Aguilera, M. S. Escalante, G. L. Nasini, “A Generalization of the Perfect Graph Theorem Under the Disjunctive Index”
Authors: Gerards A. M. H. , Maróti Gábor , Schrijver Alexander
Published: December 2003

We give short elementary proofs of two results by N. E. Aguilera, M. S. Escalante, and G. L. Nasini on the disjunctive index of the clique relaxation of the stable set polytope.
Option Methods for Incorporating Risk into Linear Capacity Planning Models
Authors: Birge John R.
Published: December 2003

Manufacturing and service operations decisions depend critically on capacity and resource limits. These limits directly affect the risk inherent in those decisions. While risk consideration is well developed in finance through efficient market theory and the capital asset pricing model, operations management models do not generally adopt these principles. One reason for this apparent inconsistency may be that analysis of an operational model does not reveal the level of risk until the model is solved. Using results from option pricing theory, we show that this inconsistency can be avoided in a wide range of planning models. By assuming the availability of market hedges, we show that risk can be incorporated into planning models by adjusting capacity and resource levels. The result resolves some possible inconsistencies between finance and operations and provides a financial basis for many planning problems. We illustrate the proposed approach using a capacity-planning example.
Sales-Force Incentives and Inventory Management
Authors: Chen Fangruo
Published: December 2003

This article studies the problem of sales-force compensation by considering the impact of sales-force behavior on a firm's production and inventory system. The sales force's compensation package affects how the salespeople are going to exert their effort, which in turn determines the sales pattern for the firm's product and ultimately drives the performance of the firm's production and inventory system. In general, a smooth demand process facilitates production/inventory planning. Therefore, it is beneficial for a firm to induce its salespeople to exert effort in a way that actually smoothes the demand process. The article proposes a compensation package to induce such behavior. It evaluates and compensates the sales force on a moving-time-window basis, where the length of the time window is determined by the production lead time. Numerical examples show that the proposed package is beneficial to the firm relative to a widely used compensation plan based on annual quotas.
Responsibility Tokens in Supply Chain Management
Authors: Porteus Evan L.
Published: December 2003

The decentralized supply chain management scheme of Lee and Whang (1999) can be viewed as operationalizing the decentralized management scheme implicit in Clark and Scarf (1960). This paper proposes the use of what are called responsibility tokens (RTs) to further facilitate that operationalization. The proposal assumes that a management information system, presumably electronic, is established to monitor inventories and shipment quantities, and to carry out transfer payments between players. As in Lee and Whang(1999), the incentives of the system are aligned, so if each player is brilliantly self-serving, the system optimal solution will result. While the system administrator need not know how the system should be managed, the most upstream player must know how to manage the system optimally for the system optimal solution to be achieved. RTs endow the system with an attractive self-correcting property: An example illustrates that upstream players are given a mechanism and the incentive to correct for downstream overordering. The downstream players who over-order are penalized, but system performance is not degraded much. Extensions and further research are also discussed.
Congestion and Complexity Costs in a Plant with Fixed Resources that Strives to Make Schedule
Authors: Lovejoy William S. , Sethuraman Kannan
Published: December 2003

In a firm that makes schedule, orders are always processed within a fixed time frame. In a congested facility, such a situation would be impossible using conventional queuing logic. We propose a conceptual model of a firm in which workers make schedule by rushing jobs, if necessary, with potential quality consequences. Hence, time and quality are substitutes, a feature that we recognize explicitly in our definition of the firm's capacity. Production yields are not exogenous parameters but endogenously determined by workers responding to schedule pressures. The plant manager can authorize overtime to relieve this pressure or live with the quality consequences of rushing. The model reveals the close relationships among the firm's workforce policies, the integrity of the inspection system, and the cost performance of the firmas its volume and/or product line expands. We consider pure congestion (driven by volume) and pure complexity (driven by product line breadth) effects in the context of our plant performance model. We consider two root causes of complexity costs: time and quality. The time effects of complexity will only have cost consequences in congested facilities, but quality effects are always present. Also in contrast to time effects, quality effects of complexity can be present in nonbottleneck workstations. Hence, the quality consequences of complexity can be as, or more important than the time consequences.
Performance-Based Incentives in a Dynamic Principal-Agent Model
Authors: Plambeck Erica L. , Zenios Stefanos A.
Published: December 2003

The principal-agent paradigm, in which a principal has a primary stake in the performance of some system but delegates operational control of that system to an agent, has many natural applications in operations management (OM). However, existing principal-agent models are of limited use to OM researchers because they cannot represent the rich dynamic structure required of OM models. This paper formulates a novel dynamic model that overcomes these limitations by combining the principal-agent framework with the physical structure of a Markov decision process. In this model one has a system moving from state to state as time passes, with transition probabilities depending on actions chosen by an agent, and a principal who pays the agent based on state transitions observed. The principal seeks an optimal payment scheme, striving to induce the actions that will maximize her expected discounted profits over a finite planning horizon. Although dynamic principal-agent models similar to the one proposed here are considered intractable, a set of assumptions are introduced that enable a systematic analysis. These assumptions involve the “economic structure” of the model but not its “physical structure.” Under these assumptions, the paper establishes that one can use a dynamic-programming recursion to derive an optimal payment scheme. This scheme is memoryless and satisfies a generalization of Bellman's principle of optimality. Important managerial insights are highlighted in the context of a two-state example called “the maintenance problem”.
Price and Time Competition for Service Delivery
Authors: So Kut C.
Published: December 2003

Many service firms use delivery time guarantees to compete for customers in the marketplace. In this research we develop a stylized model to analyze the impact of using time guarantees on competition. Demands are assumed to be sensitive to both the price and delivery time guarantees, and the objective of each firm is to select the best price and time guarantee to maximize its operating profit. We first analyze the optimization problem for the individual firms and then study the equilibrium solution in a multiple-firm competition. Using a numerical study, we further illustrate how the different firm and market characteristics would affect the price and delivery time competition in the market. Our results suggest that the equilibrium price and time guarantee decisions in an oligopolistic market with identical firms behave in a similar fashion as the optimal solution in a monopolistic situation from a previous study. However, when there are heterogeneous firms in the market, these firms will exploit their distinctive firm characteristics to differentiate their services. Assuming all other factors being equal, the high capacity firms provide better time guarantees, while firms with lower operating costs offer lower prices, and the differentiation becomes more acute as demands become more time-sensitive. Furthermore, as time-attractiveness of the market increases, firms compete less on price, and the equilibrium prices of the firms increase as a result. Our findings provide important implications about firm behaviour under price and time competition.
Work-Team Implementation and Trajectories of Manufacturing Quality: A Longitudinal Field Study
Authors: Banker Rajiv D. , Field Joy M. , Sinha Kingshuk K.
Published: December 2003

The study examines the sustainability of manufacturing quality improvements following the implementation of work teams on production lines. We posit that the impact on manufacturing quality, measured as the defect rate trajectory, is monotonically nonincreasing over time and may, more specifically, assume the shape of an inverted S-curve. Employing a longitudinal research design, we investigate four work teams over a 28-month period in a field setting. Each team corresponds to one of the four interconnected production lines in an electromechanical assembly plant operated by a Fortune 500 firm. Results of our empirical analysis support the sustainability of quality improvements associated with work team implementation and partially support the S-shaped trajectory as the particular form of sustainability. However, variations in the manufacturing quality trajectories reflect the characteristics of the work team and the production line on which each the team is instituted. From the standpoint of practice, this study highlights the importance of work-team design and implementation decisions, especially the need to be proactive in identifying and resolving initial implementation difficulties.
Assessing the Benefits of Different Stock-Allocation Policies for a Make-to-Stock Production System
Authors: Véricourt Francis de , Karaesmen Fikri , Dallery Yves
Published: December 2003

We consider a manufacturing facility that produces a single item that is demanded by several different classes of customers. The inventory-related cost performance of such a system can be improved by effective allocation of production and inventories. We obtain the optimal parameters for three easily implementable allocation policies. Our results cover the case of linear backorder costs as well as fill-rate constraints. We compare the optimal performance of these control policies to gain insights into the benefits of different production and stock-allocation rules.
Matching Supply and Demand: The Value of a Second Chance in Producing Hybrid Seed Corn
Authors: Jones Philip C. , Lowe Timothy J. , Traub Rodney D. , Kegler Greg
Published: December 2003

This paper considers a production-scheduling problem arising when there are random yields and demands as well as two sequential production periods before demand occurs. A typical instance is the production of seed corn. The paper makes three contributions. First, we verify that the objective function for the problem is smooth and concave so that optimal solutions are easily computed. Second, by examining data that represents actual costs, prices, and yields encountered in the seed corn industry, we gain some insight into the value that the second production period provides. Third, for a representative sample of hybrids from a major seed corn producer, we show that margins could be enhanced considerably by using the model. The results of this paper will assist seed corn producers in making production-scheduling decisions.
Quality and Time-to-Market Trade-offs when There Are Multiple Product Generations
Authors: Morgan Leslie Olin , Morgan Ruskin M. , Moore William L.
Published: December 2003

We extend previous work evaluating the quality versus time-to-market trade-off for a single product generation to the case of multiple generations. While a single generation framework is appropriate when either the technology is not extendable or when additional launch costs outweigh benefits, we find that it is important to recognize whether a technology is extendable and explicitly consider the potential for multiple generations. We evaluate the factors determining optimal development-cycle length and intensity using a forward-looking model that allows for multiple product generations. Comparisons are made with restricted versions of the model that reflect pure single generation and sequential single generation approaches. Against an active competitor, the multiple generation approach is much more profitable, with the greatest differences in fast-moving industries.

More total time is spent in development when a multiple generation model is used. Further, this time is dedicated to the more frequent introduction of improved product generations—a “rapid inch-up” strategy—resulting in more, higher quality products over time. Factors affecting optimal time-to-market differ substantially for the single versus multiple generation approaches. A key difference is that faster rates of quality improvement lead to longer development cycles for the single and sequential single generation models, but shorter cycles with the forward-looking multiple generation model. With a single generation, variable costs have the biggest impact on cycle length (higher costs shorten cycles), but with multiple generations, fixed costs have the biggest impact on cycle length (higher costs lead to longer cycles).
Information and Inventory Recourse for a Two-Market, Price-Setting Retailer
Authors: Petruzzi Nicholas C. , Dada Maqbool
Published: December 2003

We analyze the problem of determining inventory and pricing decisions in a two-period retail setting when an opportunity to refine information about uncertain demand is available. The model extends the newsvendor problem with pricing by allowing for multiple suppliers, the pooling of procurement resources, and more general informational dynamics. One contribution is the solution procedure: We show that all decisions (up to 7 in all, including recourse decisions) can be determined uniquely as a function of a surrogate first-period decision called the stocking factor. Hence, the two-period decision problem with recourse reduces to a search for one decision variable. A second contribution is the policy implications: We find that the cost of learning is (1) a consequence of censored information because, on the margin, learning is free if full information is guaranteed; (2) measured in the form of an increased stocking factor; and (3) shared with the consumer in the form of a higher selling price when demand uncertainty is additive. A third contribution is the application of the results to three motivating examples: a market research problem in which a product is introduced in a test market prior to a widespread launch; a global newsvendor problem in which a seasonal product is sold in two different countries with nonoverlapping selling seasons; and a minimum-quantity commitment problem in which procurement resources for multiple purchases may be pooled.
Operational Drivers of Customer Loyalty in Electronic Retailing: An Empirical Analysis of Electronic Food Retailers
Authors: Heim Gregory R. , Sinha Kingshuk K.
Published: December 2003

The relationship between customer loyalty and the order procurement and order fulfillment processes of electronic retailers is empirically examined in this paper. The study sample contains data from 52 electronic food retailers. After controlling for the retailers' product categories based on design flexibility, our regression analysis results indicate that three order procurement variables—website navigation, product information, and price; and three order fulfillment variables—product availability, timeliness of delivery, and ease of return have significant association with customer loyalty. In terms of their relative contributions toward improving customer loyalty, these variables can be ordered in a descending order as follows: ease of return, timeliness of delivery, website navigation, product availability, price, and product information.
A Simple, Robust Leadtime-Quoting Policy
Authors: Hopp Wallace J. , Sturgis Melanie Roof
Published: December 2003

We examine leadtime-quoting polices for minimizing average lead time subject to customer service constraints on fill rate, tardiness, or relative tardiness in simple systems with exponential and normal processing times. By studying the resulting safety leadtimes implied by each policy we gain insight into why some policies perform more robustly with respect to different measures of customer service than do others. This analysis suggests that a simple constant safety leadtime policy should work reasonably well under most conditions. A series of simulation experiments of more complex production environments indicates that the constant safety leadtime policy does indeed exhibit robust performance. This, plus the fact that it is extremely simple to adapt to a wide range of production environments, makes it an attractive basis for real-world leadtime-quoting systems.