Seungjin Whang

The bullwhip effect in supply chains

This publication contains reprint articles for which IEEE does not hold copyright. Full text is not available on IEEE Xplore for these articles.

The impact of information systems on organizations and markets

The adoption of information technology (IT) in organizations has been growing at a rapid pace. The use of the technology has evolved from the automation of structured processes to systems that are truly revolutionary in that they introduce change into fundamental business procedures. Indeed, it is believed that “More than being helped by computers, companies will live by them, shaping strategy and structure to fit new information technology [25].” While the importance of the relationship between information technology and organizational change is evidenced by the considerable literature on the subject,1 there is a lack of comprehensive analysis of these issues from the economic perspective. The aim of this article is to develop an economic understanding of how information systems affect some key measures of organization structure.

Optimal Incentive-Compatible Priority Pricing for the M/M/1 Queue

Consider a system that is modeled as an M/M/1 queueing system with multiple user classes. Each class is characterized by its delay cost per unit of time, its expected service time and its demand function. This paper derives a pricing mechanism which is optimal and incentive-compatible in the sense that the arrival rates and execution priorities jointly maximize the expected net value of the system while being determined, on a decentralized basis, by individual users. A closed-form expression for the resulting price structure is presented and studied.

e-Business and Supply Chain Integration

e-Business has emerged as a key enabler to drive supply chain integration. Businesses can use the Internet to gain global visibility across their extended network of trading partners and help them respond quickly to changing customer demand captured over the Internet. The impact of e-business on supply chain integration can be described along the dimensions of information integration, synchronized planning, coordinated workflow, and new business models. As a result, many of the core supply chain principles and concepts can now be put into practice much more effectively using e-business. Significant value can be created by e-business enabled supply chain integration.

Higher supply chain security with lower cost: Lessons from total quality management

Abstract Supply chain security has become a major concern to the private and public sector, after the disastrous event of September 11, 2001. Prior to September 11, 2001, supply chain security concerns were related to controlling theft and reducing contraband such as illegal drugs, illegal immigrants, and export of stolen goods. But after September 11, 2001, the threat of terrorist attacks has heightened the need to assure supply chain security. The public is of course concerned with the potential of having weapons of mass destruction embedded in the shipments through the supply chain. In addition, the private sector is concerned with the costs of assuring security, and the potential disruptions associated with real or potential terrorist acts. Governments and industry have all responded with proposals to create more confidence in supply chain security, while maintaining smooth flows of goods and services in a global supply chain. One of the most effective strategies may be to apply the lessons of successful quality improvement programs. In this paper, we describe how the principles of total quality management can actually be used to design and operate processes to assure supply chain security. The central theme of the quality movement––that higher quality can be attained at lower cost by proper management and operational design––is also applicable in supply chain security. By using the right management approach, new technology, and re-engineered operational processes, we can also achieve higher supply chain security at lower cost. We will demonstrate how this can be done with a quantitative model of a specific case example.

The Impact of the Secondary Market on the Supply Chain

This paper investigates the impacts of a secondary market where resellers can buy and sell excess inventories. We develop a two-period model with a single manufacturer and many resellers. At the beginning of the first period resellers order and receive products from the manufacturer, but at the beginning of the second period, they can trade inventories among themselves in the secondary market. We endogenously derive the optimal decisions for the resellers, along with the equilibrium market price of the secondary market. The secondary market creates two interdependent effects--a quantity effect (sales by the manufacturer) and an allocation effect (supply chain performance). The former is indeterminate; i.e., the total sales volume for the manufacturer may increase or decrease, depending on the critical fractile. The latter is always positive; i.e., the secondary market always improves allocative efficiency. The sum of the effects is also unclear--the welfare of the supply chain may or may not increase as a result of the secondary market. Lastly, we study potential strategies for the manufacturer to increase sales in the presence of the secondary market.

Coordination in operations: A taxonomy

Abstract This paper proposes a taxonomy of coordination study in operations. Its point of departure is the assumption that coordination study in operations always involves a “system” which can be a mathematical model, a software system, a business process or a game. A system is the unit of analysis in the taxonomy. In the taxonomy, systems are first divided into three categories depending on the type of coordination - coordination within operations, cross-functional coordination and inter-organizational coordination. Systems are further divided depending on how people in the organization behave, i.e., the perspective of organization. We propose three alternative perspectives of organization - single-person perspective, team perspective, and nexus-of-contract perspective of organization. Through a series of examples, we describe nine subcategories of systems.

Dynamic Pricing in Airline Seat Management for Flights with Multiple Flight Legs

Consider a multiple bo oking class airline-seat inventory control problem that relates to either a single flight leg or to multiple flight legs. During the time before the flight, the airline may face the problems of (1) what are the suitable prices for the opened booking classes, and (2) when to close those opened booking classes. This work deals with these two problems by only using the pricing policy. In this paper, a dynamic pricing model is developed in which the demand for tickets is modeled as a discrete time stochastic process. An important result of this work is that the strategy for the ticket booking policy can be reduced to sets of critical decision periods, which eliminates the need for large amounts of data storage.

Timing of RFID Adoption in a Supply Chain

This paper studies the incentives behind the adoption of radio-frequency identification (RFID) in a supply chain. One prominent feature of RFID technology is that once RFID tags are attached on the items at an upstream site, the same tags can be reused at its downstream sites at lower or zero variable cost. This creates an interesting, one-sided “free-rider” problem, where the downstream would wait to free-ride on the upstreams first move, but not vice versa. Using a stylized game-theoretic model, we characterize the equilibrium strategies of the two firms. Compared to the first-best solution, firms in equilibrium tend to adopt too late. We then study the dual benefits of technology coordination between the two firms and find that it would not only save redundant costs of putting tags, but also speed up the downstreams RFID adoption. We also show that the equal-cost-split arrangement shifts the benefit of free-riding to the upstream, thereby mitigating the negative impacts in many cases. But it may distort the market when it operates in the optimal manner. The general message of the model is that technology coordination and cost-split each contribute to the mitigation of the free-rider problem in RFID adoption.

On the Optimality of Fixed-up-to Tariff for Telecommunications Service

A tariff is the total charge payable by a customer for services provided. We study the design of tariffs for a telecommunications service provider. We develop an economic model that captures the negative externalities of the network and the diversity of customers. The tariff is designed so that it reflects the expected response of different customers and the system congestion it would induce. We study a simple tariff structure in wide use by mobile phone carriers---a menu of “fixed-up-to (FUT)” plans like “fixed access fee