Owen Q. Wu

What Actually Happened to the Inventories of American Companies Between 1981 and 2000

This paper examines the inventories of publicly traded American manufacturing companies between 1981 and 2000. The median of inventory holding periods were reduced from 96 days to 81 days. The average rate of inventory reduction is about 2% per year. The greatest reduction was found for work-in-process inventory, which declined by about 6% per year. Finished-goods inventories did not decline. Firms with abnormally high inventories have abnormally poor long-term stock returns. Firms with slightly lower than average inventories have good stock returns, but firms with the lowest inventories have only ordinary returns.

U.S. Retail and Wholesale Inventory Performance from 1981 to 2004

This paper examines the inventories of publicly traded U.S. retail and wholesale companies between 1981 and 2004. First, we document that inventory holdings have been reduced. The median of wholesale inventory holding periods was reduced from 73 days to 49 days. Retail inventory did not start to decline until about 1995. Second, we document that firms with abnormally high inventories have abnormally poor long-term stock returns. Third, we illustrate these effects for the cases of Wal-Mart, 7-Eleven (Japan), and some related firms.

Internet scheduling environment with market-driven agents

This paper describes a new generation scheduling paradigm, the Internet scheduling environment. It is formed by a group of Internet scheduling agents which share computational resources to solve scheduling problems in a distributed and collaborative manner. We propose a migration scheme to transform existing standalone scheduling systems to Internet scheduling agents that can communicate with each other and solve problems beyond individual capabilities. To coordinate computational resource collaboration among agents, we introduce the market-based control mechanism in which self-interested agents initiate or participate in auctions to sell or buy scheduling problems. Efficient allocation of computational resources is achieved through the auctions. This paper also describes a prototype Internet scheduling environment named LekiNET, which is migrated from LEKIN/spl reg/, a flexible job shop scheduling system. The experiments on the LekiNET testbed demonstrate that the agent-based market-driven Internet scheduling environment is feasible and advantageous to future scheduling research and development.

Curtailing Intermittent Generation in Electrical Systems

Energy generation from intermittent renewable sources introduces additional variability into electrical systems, resulting in a higher cost of balancing against the increased variabilities. Ways to balance demand and supply for electricity include using flexible generation resources, storage operations, and curtailing intermittent generation. This paper focuses on the operational and environmental impact of curtailing intermittent generation. We construct a stochastic dynamic optimization model that captures the critical components of the system operating cost and analyze how various generation resources should operate with and without curtailing intermittent generation. We find that the system cost reduction per unit of curtailed energy is consistently significant and the presence of storage may increase the cost saving per unit of curtailed energy. We also find that curtailing intermittent generation often leads to system emission reductions.

Seasonal Energy Storage Operations with Limited Flexibility: The Price-Adjusted Rolling Intrinsic Policy

The value of seasonal energy storage depends on how the firm operates storage to capture seasonal price spreads. Energy storage operations typically face limited operational flexibility characterized by the speed of storing and releasing energy, which makes the optimal policy, in general, difficult to compute. A widely used practice-based heuristic, the rolling intrinsic (RI) policy, generally performs well compared with an optimal policy but can significantly underperform in some cases. In this paper, we aim to understand the gap between the RI policy and the optimal policy and leverage the resulting insights to improve the RI policy. A new heuristic policy, the price-adjusted rolling intrinsic (PARI) policy, is developed based on theoretical analysis of storage options. This heuristic adjusts certain prices before applying the RI policy to provide the RI policy with estimates of the values of various storage options. We evaluate the performance of the RI and PARI polices using actual data from the natural gas industry. Our results show that, on average, the PARI policy recovers about 67% of the value loss of the RI policy. Furthermore, when the value loss of the RI policy is larger, the PARI policy tends to recover a higher fraction of that value loss.

Optimal Control and Equilibrium Behavior of Production-Inventory Systems

The relationship between commodity inventory and short-term price variations has received considerable attention, but the understanding has been limited to single-stage cross-sectional relation. In this paper, we aim to deepen our understanding of the inventory--price relationship in two dimensions: across time and across production stages. We first examine an individual firm controlling production and two stages of inventory under uncertain input and output prices and operating costs. We next establish and characterize the rational expectations equilibrium for an economy in which competitive production firms link a raw material market and a finished goods market, with uncertain and price-sensitive supply and demand. We characterize the dynamics of inventory, market price, and gross margin based on theoretical analysis, simulation, and empirical evidence from the petroleum industry. We find that inventory fluctuations lag behind price variations, and the length of the lags depend on how far the inventory is from the source of the supply or demand shocks. We also find that shocks are both dampened and delayed when propagating through the production stages, and that shocks have a prolonged effect on inventories and prices at both stages.

Energy-Efficient Transmission Scheduling With Strict Underflow Constraints

This paper considers a single source transmitting data to one or more receivers/users over a shared wireless channel. Due to random fading, the wireless channel conditions vary with time and from user to user. Each user has a buffer to store received packets before they are drained. At each time step, the source determines how much power to use for transmission to each user. The sources objective is to dynamically allocate power in a manner that minimizes total power consumption and packet holding costs, while satisfying strict buffer underflow constraints and a joint power constraint in each slot. The primary application motivating this problem is wireless media streaming. For this application, the buffer underflow constraints prevent the user buffers from emptying, so as to maintain playout quality. In the case of a single user, a state-dependent modified base-stock policy is shown to be optimal with linear power-rate curves, and a state-dependent finite generalized base-stock policy is shown to be optimal with piecewise-linear convex power-rate curves. When certain technical conditions are satisfied, efficient methods to compute the critical numbers that complete the characterizations of the optimal control laws in each of these cases are presented. The structure of the optimal policy for the case of two users is then analyzed.

Manufacturers' Competition and Subsidies to Suppliers

Dealing with risky suppliers is a part of everyday business for manufacturers. For example, the domestic automotive supply industry has faced numerous hardships as some of its largest firms have flirted with bankruptcy, or have been subsumed by Chap 11 over the past few years. Nearly 30% of the pre-existing North American automotive supply base had filed for bankruptcy by the end of 2008. Half are predicted to file for bankruptcy before the end of 2010.

Stock Ownership Decisions in Defined-Contribution Pension Plans

Why would investors choose a large weighting in the stock of their employer? Holding employer company stock is very risky. It is optimal only for employees with very low risk aversion or with very high return expectations for company stock. Rational one-period models cannot explain high observed weightings in company stock in defined-contribution pension plans. Nor can a behavioral interpretation. Some factors must be missing from rational choice models to explain employer company stock holdings.

Unit-Contingent Power Purchase Agreement and Asymmetric Information About Plant Outage

This paper analyzes a unit-contingent power purchase agreement between an electricity distributor and a power plant. Under such a contract the distributor pays the plant a fixed price if the plant is operational and nothing if plant outage occurs. Pricing a unit-contingent contract is complicated by the fact that the plants true status is its private information. The difference between the electricity spot price and the unit-contingent contract price provides an incentive for the plant to misreport its status and earn profit at the distributors expense. To prevent misreporting, the distributor may inspect the plant and levy penalties if misreporting is discovered. We find that some type of misreporting under certain circumstances can benefit both the plant and the distributor, because it serves as a risk-allocation mechanism between the two parties. We show that such a risk-allocation mechanism is equivalent to using state-contingent options and prohibiting misreporting.