Supply Chain and Operations Research

This area examines the flow of goods and services, the movement and storage of raw materials, of work-in-process inventory, and of finished goods from point of origin to point of consumption. Our faculty have explored best practices of demand fulfillment through transshipment across a network of stores and distribution centers, which have an impact on customers’ overall shopping experience and the profit of each member of a supply chain. Our faculty also have analyzed the risk of failure points within a supply chain. They are interested in examining organizational, operational and behavioral causes of product recalls. Additionally, they study suppliers' incentives and how financing mechanisms can be used to the efficiency of the chain.

This area examines management principles and theory on designing and managing service and retail operations. Our faculty are interested in analyzing the impact of customers’ behavior on the service quality and designing service disciplines which improve the performance measure of the systems. Operations in a typical retail supply chain includes ordering, stocking, offering, and delivering thousands of SKUs in hundreds of product categories. Hence, it is important to understand customer choice among a set of alternatives in a retail environment, where an alternative means not only a product variant itself, but also how it is presented and/or delivered to the customer, which have profound effects on customer choice. Our faculty examine retailers’ assortment related decisions, and the effectiveness of different omnichannel strategies that provide seamless shopping experience to customer whether she is shopping online, from a desktop or mobile device, by telephone, or in a bricks and mortar store.

This area focuses on approaches for achieving operational excellence as one of the important ways of driving down costs of care while maintaining its desired quality. Our faculty have examined aspects such as patient flow within hospitals, hospital staffing, clinical trial design, and pharmaceutical pricing. Their research provided a new adaptive design approach for multi-arm clinical trials such as Phase II/III dose-finding trials. Furthermore, our faculty examine a range of pharmaceutical risk-sharing contracts which allow a post-marketing update to a medical treatment’s price based on its performance. In addition, the faculty study the consequences of regulation on healthcare providers to better understand their impact on patients.

This area examines strategies, techniques and operational policies to support economic, environmental and social objectives and goals. Our faculty have examined forward logistics in the chain—that is, procurement of materials, production and distribution—as well as the reverse logistics to collect and process returned products and/or parts of products to ensure socioeconomically and ecologically sustainable recovery in a circular economy. Research has also explored strategies and cost implications of carbon footprint reduction for a firm's direct and indirect emissions, including investments in carbon offsets, in a market where some consumers are sensitive to environmental issues.

This area explores human behaviors that underlie operational systems and processes. Our faculty have explored ways in which deviations from rational behaviors impact operational performance (for example, incentives in procurement), and the ways in which operational policies (for example, collaboration/competition) impact behavior.

This area refers to operations that are directed to deal with disasters, focusing on coordinating supplies, information and finances, which are moved between donors, beneficiaries, suppliers, and humanitarian organizations to provide aid to beneficiaries. Humanitarian operations impact infrastructure which in turn affect an organization’s profitability and performance. Our faculty have investigated the defining characteristics of humanitarian operations such as funding and donations, equity-efficiency tradeoffs, decentralized decision-making, and last mile distribution.

This area includes a range of issues in the investment and operations management of energy resources, including conventional and renewable energy resources and energy storage, as well as demand-side resources. Our faculty have studied issues such as investing in and managing intermittent renewable energy resources, storage investment and operations, energy market competition, demand response and energy efficiency investments.

For U.S. manufacturers that produce both make-to-order (MTO) and make-to-stock (MTS) items, a typical strategy might involve a (more expensive) flexible domestic factory creating the custom products and a (less expensive) overseas facility to make the standard variants. By creating an analytical model and applying it to a real-world test case at Timbuk2, Kyle Cattani and his colleagues show how some manufacturers can actually save money by foregoing offshore production in favor of an approach they refer to as “spackling,” wherein the flexible factory’s unused production capacity is filled in with production of standard-issue items. See the associated video here.

• Kyle D. Cattani, Ely Dahan, Glen M. Schmidt, “Lowest Cost May Not Lower Total Cost: Using ‘Spackling’ to Smooth Mass-Customized Production,” Production and Operations Management, 19(5), pages 531–545, 2010.

Ground transportation is among the most critical factors in delivering international humanitarian aid. In developing their vehicle replacement policies, however, organizations like the International Committee of the Red Cross have relied on manufacturers’ recommendations derived from commercial-sector data. With this study, Alfonso J. Pedraza-Martinez and his colleagues examine data on vehicle purchase, use, and sale in the context of humanitarian operations in Afghanistan, Ethiopia, Georgia, and Sudan. Their optimization model reveals that what works for commercial fleets does not necessarily apply to vehicles delivering humanitarian aid. See the associated video here.

• Alfonso J. Pedraza-Martinez and Luk N. Van Wassenhove, “Vehicle Replacement in the International Committee of the Red Cross,” Production and Operations Management, 22(2), pages 365-376, 2012.

As equipment leasing becomes more prevalent, companies are increasingly turning to remanufacturing returned items. When functional products are returned at the end of a lease term, it makes sense for a company to recover value from those items rather than scrapping them wholesale. For original equipment manufacturers (OEMs), refurbishing and reselling those items makes good sense—not just from a financial perspective but also from a “green” perspective. However, remanufacturing items is a complex process that involves acquiring the used products, determining whether they’re more suitable for remanufacture or salvage and distributing them accordingly, remanufacturing products, and remarketing them. In this study, Gil Souza and his colleagues examine how grading the quality of returned items can help companies determine the best course of action for remanufacturing operations. Is it worth it to add an additional level of complexity to the steps that must already be taken in the remanufacturing process?

• Mark Ferguson, V. Daniel Guide Jr., Eylem Koca, and Gilvan C. Souza, “The Value of Quality Grading in Remanufacturing,” Production and Operations Management, 18 (3), pages 300–314, 2009.

How to use delay announcements to manage customer expectations while allowing the firm to prioritize among customers with different sensitivities to time and value? Qiuping Yu and her colleagues examine this problem by developing a framework which characterizes the strategic interaction between the firm and heterogeneous customers. When the firm has information about the state of the system, yet lacks information on customer types, delay announcements play a dual role: they inform customers about the state of the system, while they also have the potential to elicit information on customer types based on their response to the announcements. The tension between these two goals has implications to the type of information that can be shared credibly. To explore the value of the information on customer types, the authors also study a model where the firm can observe customer types. They show that having information on the customer type may improve or hurt the credibility of the firm. While the creation of credibility increases the firm's profit, the loss of credibility does not necessarily hurt its profit.

• Qiuping Yu, G. Allon, A. Bassamboo, and S. Iravani, “Managing Customer Expectations and Priorities in Service Systems.” Management Science, forthcoming.

While there is overwhelming support for the negative consequences of product recalls, empirical evidence of operational drivers of recalls is almost nonexistent. In this study, George Ball and his colleagues identify product variety (measured as the number of factory installed options), plant variety (measured as the number of models per assembly line in a plant), and capacity utilization as drivers of subsequent manufacturing-related recalls. The authors examine their individual and joint effects using a unique data set compiled for a seven-year period by linking assembly line production data for North American automotive manufacturers with recall data from the National Highway Traffic and Safety Administration. The authors show that manufacturing-related recalls are positively associated with product variety and plant utilization, but not with plant variety. They also find that the joint effect of plant variety and utilization is positively associated with increased recalls. In quantitative terms, a one-standard-deviation increase in the number of options (four additional options) is associated with two additional recalls and costs $46.2 million to automakers over the sample duration.

• R. Shah, George P. Ball, and S. Netessine, “Plant Operations and Product Recalls in the Automotive Industry: An Empirical Investigation.” Management Science, 2017.

What signals a supplier is trustworthy? The methodology consists of developing a theoretical model and then testing it with laboratory experiments to reflect supplier trustworthiness and determining when a buyer can benefit from identifying trustworthy suppliers, Ruth and her colleagues show that pre-contractual relationship-specific investments can serve as a signal of trustworthiness and that supply chain profits increase when trustworthy suppliers are able to identify themselves in this fashion. They also show that the benefits of buyer-specific investments for both suppliers and buyers are strengthened when firms interact repeatedly.

• Ruth Beer, H.S. Ahn and S. Leider, “Can Trustworthiness in a Supply Chain be Signaled?” Management Science, forthcoming. 

Expensive and frequent hospital readmissions present an increasingly important challenge for healthcare organizations. Knowing when a patient is likely to be readmitted and when to monitor the discharged patient to identify a condition before it triggers readmission are key to treating this issue. In their research, Kurt, Jonathan, and their colleagues develop new methods to generate an estimate of the time to readmit, which can then be used to prepare a post‐discharge monitoring schedule and staffing plan to support monitoring needs. Using a multi-methodologic approach that includes classical prediction modeling, delay time models and network flow models, optimal readmission prediction and monitoring plans can identify and reduce the severity of 40–70% of readmissions before they generate an emergency readmission.

• J.E. Helm, A. Alaeddini, J. Stauffer, Kurt Bretthauer, and T. Skolarus (2016) “Reducing Hospital Readmissions by Integrating Empirical Prediction with Resource Optimization.” Production and Operations Management 25(2): 233-257.

Owen and his colleagues study the impact of intermittent renewable power generation on the electricity market competition, in which power generators with different levels of flexibility participate in a supply function competition. Their findings show that generators’ inflexibility contributes to the market power and that the policy of economically curtailing intermittent generation intensifies the market competition, reduces price volatility, and improves the system’s overall efficiency, especially when the production-based subsidies for renewable energy are absent.

• M. Al-Gwaiz, X. Chao, and Owen Wu (2017) “Understanding How Generation Flexibility and Renewable Energy Affect Power Market Competition.” Manufacturing & Service Operations Management 19(1): 114-131.