Vera Tilson

Analytical model of adoption of item level RFID in a two-echelon supply chain with shelf-space and price-dependent demand

We investigate whether it is possible for the manufacturer as well as the retailer to derive economic benefits from item-level RFID. We consider a particular model of shelf-space and price-dependent retail demand and two configurations of the supply chain. In both instances the interaction between the supplier and the retailer is via a wholesale price contract. In one case it is the supplier who sets a linear wholesale tariff on the finished goods. In another case both retail and wholesale prices are set exogenously, and the supplier must pay the retailer for shelf-space so that the retailer will carry the suppliers product. We find that in both cases when the supplier benefits from item-level RFID so does the retailer. However when the supplier sets the wholesale price the interests of the supplier and the retailer are aligned if the retailer benefits from item-level RFID then so does the supplier and vice versa. On the other hand if wholesale prices are set exogenously, and the supplier is able to command payment for shelf-space it is possible for the interests not to be aligned: the retailer may be benefiting from RFID technology as the supplier is losing money.

Channel Strategies for Durable Goods: Coexistence of Selling and Leasing to Individual and Corporate Consumers

In durable goods markets, such as those for automobiles or computers, the coexistence of selling and leasing is common as is the existence of both corporate and individual consumers. Leases to the corporate consumers affect the price of used goods on the second-hand market which in turn affect the buying and leasing behavior of individual consumers. The setting of prices (or volumes) for sale and lease to individual and corporate consumers is a complicated problem for manufacturers. We consider a manufacturer who concurrently sells and leases a finitely durable good to both individual and corporate consumers. The interaction between the manufacturer and consumers is modeled as a dynamic sequential game, where each player seeks to maximize its own payoff over an infinite horizon. We study how the corporate channel and substitutability of new goods and used goods affect the manufacturers pricing decisions, consumer behavior and social welfare in the retail market. Making a number of simplifying assumptions including two-period lifetime for the finitely durable goods, we show that all individual consumers follow Markov Perfect consumption strategies and based on their individual willingness to pay choose one of four two-period product bundles. They either (1) lease a new product every period, (2) repeatedly buying a new good and use it for two periods, (3) always buy used goods, and (4) do not participate in the market. We show that when used goods are poor substitutes for new goods, as the manufacturer increases her leasing volume in the corporate channel, she optimally raises her leasing price to individual consumers, but may not necessarily adjust the selling price of new goods. As the retail lease price rises, retail consumers that prefer leasing experience a loss in surplus. However, aggregate consumer surplus increases with increase in corporate leasing. On the other hand, when used goods are close substitutes for new goods, with increased corporate leasing, the manufacturer stops leasing to individual consumers and raises retail sales prices.

Optimal Workflow Decisions for Investigators in Systems with Interruptions

We model a system which consists of a stream of customers processed through three steps by two resources. The first resource, an investigator, handles the first step, in which she collects information from the customer and decides what work will be done in the second step by the second resource, the back office. In the third step the investigator returns to the customer armed with the additional information or analysis done by the back office and provides the customer with a conclusion, solution, or diagnosis.The investigator has to determine whether to prioritize seeing a new customer, or complete the work with a customer already in the system. While serving one customer, the investigator may be interrupted by requests from the other customers in the system. Our main objective is to understand the impact of the investigator’s choices on system throughput. In addition we are also interested in the occupancy of the system (and thus on the flow time of customers). We create a stylized queuing model to examine the investigator’s decisions and show that, when interruptions are not an issue, the investigator should prioritize new customers to maximize throughput, keeping the system as full as possible. If customers who have been in the system for a long time generate interruptions and thus additional work for the investigator, then we show that it is asymptotically optimal for the investigator to keep the system occupancy low and prioritize discharging customers. Our conclusions are based on a model of a re-entrant queue with dedicated servers serving multiple stations, with two novel features: a buffer that is shared between stations and jobs in the system generating additional work for the servers.

Literature survey: Mathematical models in the analysis of durable goods with emphasis on information systems and operations management issues

Durable goods account for a significant portion of the economy and have been of considerable interest to academic researchers, especially economists, over the last four decades. Given the importance of strategic issues concerning durable goods markets to IS and OM researchers, our objective is to present a broad perspective of the research in this field that can serve as a starting point for their modeling efforts when analyzing these markets. Due to the complexity of these markets and the strategic interlinkage of decisions over time, a careful examination of the models is essential for the proper understanding and interpretation of the results from the literature. This paper provides a macro perspective of the research problems, a simple integrative framework for modeling durable goods, an introduction to the models and solution concepts commonly used in the literature, and a discussion of the primary results in the context of their modeling choices. Potentially interesting directions for future IS and OM research in this area are also identified.

Monopoly Production and Pricing of Finitely Durable Goods with Strategic Consumers’ Fluctuating Willingness to Pay

Demand volatility and production lead time oblige manufacturers of made-to-stock goods to use economic forecasts in deciding on production quantities. Manufacturers of finitely durable goods face an additional complication—in making production decisions, they must consider not only the uncertainty in demand for new goods, but also how the future sales will be affected by the older goods that will become available via a secondhand market. Using a model of an infinite-horizon sequential game between a monopolistic producer of durable goods and strategic consumers, we investigate how demand volatility affects producers’ production and pricing decisions. We formulate the problem of a monopolist durable goods producer as a discrete-time Markov Decision Process and prove certain structural properties of the sales and production policy. These structural properties facilitate an efficient computational algorithm, which we use in running numerical experiments to explicate the producer׳s strategy and to conduct equilibrium comparative statics analysis. We show that a simple myopic policy is optimal when each period׳s demand is independent and identically distributed (i.i.d.). When demand is correlated across periods, the producer׳s optimal production and sales policy is not myopic, and in some states, when the economy is poor, the producer withholds some of the new goods inventory. Our numerical results suggest that in equilibrium, the producer who is dealing with myopic rather than with forward-looking consumers is more likely to sell some of these held-back goods later, as vintage goods.

Technical Note---Managing a Secret Project

We study project scheduling in a competitive setting taking the perspective of a project manager with an adversary, using a Stackelberg game format. The project manager seeks to limit the adversarys opportunity to react to the project and therefore wants to manage the project in a way that keeps the adversary “in the dark” as long as possible while completing the project on time. We formulate and illustrate a new form of project management problem for secret projects where the project manager uses a combination of deception, task scheduling, and crashing to minimize the time between when the adversary initiates a response to the project to when the project is completed. We propose a novel mixed-integer linear programming formulation for the problem and determine characteristics of optimal schedules in this context. Using a detailed example of nuclear weapons development, we illustrate the interconnectedness of the deception, task scheduling, and crashing, and how these influence adversary behavior.

Pricing and allocation of retail space with one radio frequency identification enabled supplier and one non-RFID enabled supplier

We consider a retailer with one radio frequency identification (RFID) enabled supplier and one non-RFID enabled supplier. Assuming vendor managed inventory, we address the problem of allocation and pricing of the retail shelf-space. Using a Stackelberg game where the retailer leads, we observe that the RFID technology provides a competitive advantage for the RFID enabled supplier. Further, high product substitutability, high demand uncertainty, low tag prices, and low restocking costs favour the RFID enabled supplier. As shelf-space is capacitated with large fixed costs and its demand varies over time, shelf-space management addresses many of the same challenges as revenue management.

Configuring surgical instrument trays to reduce costs

Most hospitals in the United States provide and manage significant inventories of durable surgical instruments used in operating rooms. The sheer volume and variety of instruments introduces considerable complexity in ensuring that the right instruments are available at the right time. Surgical instruments are usually stored and delivered to an operating room (OR) as procedure-specific sets of trays with multiple instruments included in a single tray. Because procedure trays are used by multiple surgeons trained at different institutions, procedure trays often include surgeon-specific instruments. Hospital materials managers and surgeons appear to weigh differently the various attributes of different tray configurations. Materials managers want to limit the cost of inventory and the variety of trays. Surgeons, on the other hand, prefer trays with the minimum number of unneeded instruments. Clearly, the kitting of surgical instruments into trays has many benefits, yet the actual tray design is a complex co...

Mathematical Modeling to Reduce Waste of Compounded Sterile Products in Hospital Pharmacies

In recent years, many US hospitals embarked on “lean” projects to reduce waste. One advantage of the lean operational improvement methodology is that it relies on process observation by those engaged in the work and requires relatively little data. However, the thoughtful analysis of the data captured by operational systems allows the modeling of many potential process options. Such models permit the evaluation of likely waste reductions and financial savings before actual process changes are made. Thus the most promising options can be identified prospectively, change efforts targeted accordingly, and realistic targets set. This article provides one example of such a data-driven process redesign project focusing on waste reduction in an in-hospital pharmacy. A mathematical model of the medication prepared and delivered by the pharmacy is used to estimate the savings from several potential redesign options (rescheduling the start of production, scheduling multiple batches, or reordering production within a batch) as well as the impact of information system enhancements. The key finding is that mathematical modeling can indeed be a useful tool. In one hospital setting, it estimated that waste could be realistically reduced by around 50% by using several process changes and that the greatest benefit would be gained by rescheduling the start of production (for a single batch) away from the period when most order cancellations are made.

On the complexity of project scheduling to minimize exposed time

We consider project scheduling where the project manager’s objective is to minimize the time from when an adversary discovers the project until the completion of the project. We analyze the complexity of the problem identifying both polynomially solvable and NP-hard versions of the problem. The complexity of the problem is seen to be dependent on the nature of renewable resource constraints, precedence constraints, and the ability to crash activities in the project.