Sunder Kekre

Business value of information technology: a study of electronic data interchange

A great deal of controversy exists about the impact of information technology on firm performance. While some authors have reported positive impacts, others have found negative or no impacts. This study focuses on Electronic Data Interchange (EDI) technology. Many of the problems in this line of research are over-come in this study by conducting a careful analysis of the performance data of the past decade gathered from the assembly centers of Chrysler Corporation. This study estimates the dollar benefits of improved information exchanges between Chrysler and its suppliers that result from using EDI. After controlling for variations in operational complexity arising from mix, volume, parts complexity, model, and engineering changes, the savings per vehicle that result from improved information exchanges are estimated to be about

Strategic and Operational Benefits of Electronic Integration in B2B Procurement Processes

60. Including the additional savings from electronic document preparation and transmission, the total benefits of EDI per vehicle amount to over

Product Differentiation and Commonality in Design: Balancing Revenue and Cost Drivers

100. System wide, this translates to annual savings of

Relevant costs, congestion and stochasticity in production environments

220 million for the company.

Impact of electronic data interchange technology on quality improvement and inventory reduction programs: a field study

Our goal is to assess the strategic and operational benefits of electronic integration for industrial procurement. We conduct a field study with an industrial supplier and examine the drivers of performance of the procurement process. Our research quantifies both the operational and strategic impacts of electronic integration in a B2B procurement environment for a supplier. Additionally, we show that the customer also obtains substantial benefits from efficient procurement transaction processing. We isolate the performance impact of technology choice and ordering processes on both the trading partners. A significant finding is that the supplier derives large strategic benefits when the customer initiates the system and the supplier enhances the systems capabilities. With respect to operational benefits, we find that when suppliers have advanced electronic linkages, the order-processing system significantly increases benefits to both parties.

The dynamic lot-sizing problem with startup and reservation costs

Product design decisions substantially affect the cost and revenue drivers. A design configuration with commonality can lower manufacturing cost. However, such a design may hinder the ability to extract price premiums through product differentiation. We explicitly investigate the marketing-manufacturing trade-off and derive analytical implications for three possible design configurations: unique, premium-common, and basic-common. Our model considers two distinct segments of consumers. Some of the implications of our analysis are not readily apparent. For example, when the high-quality component is made common, the average quality of the products offered to the two segments increases. One may infer that with higher average quality, higher prices or higher total revenues might ensue. However, this may not be the case, as detailed in the paper. Finally, our analysis provides a useful framework to develop an index that can rank order components in terms of their attractiveness for commonality.

Performance of a Manufacturing Cell with Increased Product Mix

Abstract Conventional management accounting principles used to evaluate relevant costs have been developed under the assumption of deterministic manufacturing settings. Manufacturing operations, however, are complex and stochastic. In this paper we examine the impact of stochasticity in the production process on relevant costs based on a dynamic assessment of capacity constraints. We develop a model to analyze the behavior of relevant costs with respect to changes in the expected duration and variability in set-ups and processing. An implication of this analysis is that for profit maximization capacity will exceed expected demand if production rates or demand are stochastic.

Managing NPD: Cost and Schedule Performance in Design and Manufacturing

Abstract Despite the impressive growth in the use of EDI technology by US manufacturing companies, there is a paucity of research examining the impacts of this technology on manufacturing performance. We systematically investigate the effects of routine and exception EDI transactions on the quality improvement and inventory reduction programs of 65 outside processors employed by LTV Steel, one of the major steel producers in the US. Our results provide evidence for the favorable impacts in firms using routine EDI transactions. Performance improves with higher quality and lower inventory. We also find quality improving with lower levels of inventory. The analysis supports the hypothesis that firms using routine EDI transactions achieve synchronized manufacturing for JIT environments, while those with EDI exception transactions are able to mitigate the negative impacts of process uncertainties as a result of timely information. Furthermore, the interactions between the quality improvement and inventory reduction programs magnify the beneficial impact of EDI transactions.

Multi-item batching heuristics for minimization of queueing delays

Dynamic lot-sizing models often assume that a production system incurs a fixed cost in each period that production is positive. In this paper, we consider a model with a startup cost incurred for switching on the production facility and a separate reservation cost charged for keeping the facility on whether or not it is used for production. Computationally, this problem is as hard as the usual model; the general capacitated case is NP-hard. We present a dynamic programming algorithm for the uncapacitated case, and a branch-and-bound approach using Lagrangian relaxation for the capacitated problem. We report computational experience on both the quality of the bounds employed and the effectiveness of the algorithm.

Manufacturing configuration, capacity and mix decisions considering operational costs

Abstract We investigate the impact of increasing the number of items made in a cell on its performance. The optimal lotsizes of production and queuing delays are both shown to increase with increased product mix. However, these adverse effects diminish as more items are assigned to the cell. We also examine a strategy of sequencing which attempts to minimize the number of setups by looking ahead in the queue and processing all items for which the machine is already setup. In the case of similar items, it is found that this sequencing policy results in little savings in setup time.