Vicente Vargas

A typology of de-coupling strategies in mixed services

Abstract A typology of a class of service systems is proposed. The typology links strategic operational objectives to the decision to de-couple work between the front and back offices of a service system. Four specific ideal types of a strategy/de-coupling mix are described; each of which has distinct operational, marketing and human resource ramifications. A type that has had significant representation in traditional literature is the “Cost Leader” type, where back-office activities are de-coupled from the front office for the purpose of lowering costs. Another traditional type representative of the craftsman legacy is the “Personal Service” type, which retains back-office tasks in the front office to pursue non-cost-oriented strategic goals. Theoretical and empirical evidence is also given for two non-traditional types: the “Kiosk” type, where all tasks remain in the front office to achieve lower costs, and the “Focused Professional” type, which de-couples front- and back-office activities to enable front-office workers to provide higher service, rather than to reduce costs. Empirically, retail bank lending systems are analyzed to support the typology.

An optimal solution for the stochastic version of the Wagner-Whitin dynamic lot-size model

We present an algorithm for determining the optimal solution over the entire planning horizon for the dynamic lot-size model where demand is stochastic and non-stationary. The optimal solution to the deterministic problem is the well-known Wagner-Whitin algorithm. The present work contributes principally to knowledge building and provides a tool for researchers. One potentially useful contribution to practice is the solution to an important special case, where demand follows normal distributions. Other contributions to practice will likely flow from the development of improved heuristics and the improved basis to evaluate heuristic performance.

Yield Management for the Nonprofit Sector

Yield management techniques have been shown to be highly effective in many for-profit firms, led by the airline and hotel industries. Yield management is intended to maximize profits for a capacity-constrained service by price discriminating among customer types for essentially undifferentiated services. The authors extend yield management concepts to the nonprofit sector, where profit maximization no longer is a goal. A general heuristic is presented to assist decision makers in pricing decisions. The technique is demonstrated at a nonprofit child care center that provides discounts to low-income families.

Quantifying the benefits of breaking bulk in retail operations

Abstract We explore the benefits of ‘breaking bulk’ in retail operations. Here, breaking bulk refers to delivering single units from distribution centers to retail outlets rather than the multiple units bundled together by manufacturers termed ‘case-packs’. The focus is largely on the benefits to space management at the retail level, rather than the more obvious reduction in inventory costs. Using data from the grocery industry, results indicate that retail unit profitability can be increased substantially by breaking bulk—but only if current inventory replenishment practices are changed. In essence, breaking bulk allows for either higher product variety within a store or identical variety in smaller stores. This work seeks to quantify the order of magnitude of that benefit.

An investigation of the sensitivity of DEA to data errors

Abstract The predictive value of a common measure of efficiency and the robustness of the data envelopment analysis (DEA) technique is examined when statistical noise is present in the data. Inferences are drawn from a hypothetical example regarding the potential limitations of the efficiency measure and pitfalls in both the single- and multi-stage applications of DEA. We propose a simple procedure to investigate the robustness of DEA results. The procedure maintains the relative computational simplicity of DEA and is easy to apply and interpret. Using this procedure, we examine the robustness of the results reported in two published DEA studies and find that, indeed, pitfalls occur in practical applications. We conclude with recommendations for researchers applying the technique and implications for managers.

Case Article---MotherLand Air: Using Experiential Learning to Teach Revenue Management Concepts

The MotherLand Air case and game provide students with a first-hand experience in revenue management. The game is conducted in the classroom, and students, who have the opportunity to prepare in advance, work in teams. During the exercise, students make and revise pricing and protection-level decisions over a six-month, predeparture time horizon for two simulated flights. The case provides an introduction to nested reservation systems and overbooking and pricing polices. Case Teaching Note: Interested Instructors please see the Instructor Materials page for access to the restricted materials. To maintain the integrity and usefulness of cases published in ITE, unapproved distribution of the case teaching notes and other restricted materials to any other party is prohibited.

Teaching Note---MotherLand Air: Using Experiential Learning to Teach Revenue Management Concepts

Case Teaching Note: Interested Instructors please see the Instructor Materials page for access to the restricted materials. To maintain the integrity and usefulness of cases published in ITE, unapproved distribution of the case teaching notes and other restricted materials to any other party is prohibited.