Why we need operations and management research
From malaria testing to micro-retail stores to global business operations, a clear understanding of what is happening in the supply chain is essential to exist and succeed. Observation of operations and knowledge of human actions alone are not enough. According to W. Edward Demming, "The world is drowning in information but is slow in the acquisition of knowledge." MIT CTL and SCALE researchers take aim at the deluge of information and translate it into working knowledge with their applied research. As part of this ongoing effort, 11 papers on diverse topics were presented at the 2018 Institute for Operations Research and the Management Sciences (INFORMS) annual conference.
These researchers' works continue to impact decision making and planning across a range of industries and types of operation. Each paper is summarized below with titles and abstracts as presented at INFORMS in October. For more information on any of these papers please contact ctl_comm@mit.edu.
MIT CTL Researchers meet at INFORMS
Management, quality, and consumer opinion
Sourcing Uncertain Product Quality: Competition, Learning, and Volume Postponement
Abstract: Global-health buyers seek to introduce competition by incenting new generics suppliers with uncertain performance/quality to enter the market. We investigate the benefits of postponing a portion of the award to learn entrant’s performance and how the dynamics of learning and competition depend on the size of the postponed volume.
Authors: Felix Lauton, Alexander Rothkopf, Richard Pibernik
How Does Price Volatility Influence Demand of Revenue Managed Goods?
Abstract: We estimate the impact of price fluctuations on demand in the context of revenue-managed goods, first by introducing a new measure of price volatility and second by quantifying the effect on demand elasticity. Using airfare and sales data collected for 21 European route-pairs over five months, we carry out our empirical analyses (IV 2SLS regressions) revealing that as price volatility increases, consumers tend to buy less. We demonstrate how this can be integrated into the classical revenue management model (Expected Marginal Seat Revenue) to yield higher revenues.
Authors: Chiara Morlotti, Benny Mantin, Paolo Malighetti, Renato Redondi
The Impact of Dealer Networks on the Market Success of Automobile Manufacturers
Finalist for the 2018 IBM Best Student Paper Award for the INFORMS Service Science Section.
Abstract: Most automobile manufacturers use a network of franchised dealers to sell and service their products. Some arguments and studies suggest that the quality of the sales process and subsequent post-sales services can impact sales, repeat sales, and reputation. Other arguments and studies suggest that dealer services are a commodity and that their quality may only impact sales in the extremes. Analyzing new car sales by dealers across the US, we find that dealer quality positively influences automobile brand sales. This effect becomes stronger in markets where the focal brand’s dealer network is sparse and the competing dealer networks are dense.
Authors: Sina Golara, Kevin J. Dooley
Retail, small firms, consumer goods
A Data-Driven Forecasting Approach for Newly Launched Seasonal Products
Abstract: Demand forecasting is becoming a very complicated process in the fashion industry due to the short product lifecycles, the obsolescence of the retail calendar, and the lack of information for newly launched seasonal items. Therefore, this study focuses on demand prediction with a data-driven perspective both leveraging machine-learning techniques and identifying significant predictor variables to help fashion retailers achieve better forecast accuracy.
Authors: Vicky Wing Kei Chan, Majd Kharfan, Tugba Efendigil
Improving the survival rate of small firms in developing countries by leveraging SCM Practices
Abstract: Small firms represent more than 95% of companies in developing countries. Due to a lack of productivity, only a fraction survive. In this paper, we study the impact of Supply Chain Practices in small firms and show that by improving Supply Chain expertise, small firms also improve their survival rate. We present a conceptual framework based on a system dynamics model that provides guidance on which order small firms should focus on Supply Chain and Business Priorities. We validate our framework via a field study conducted in 50 companies in three countries in Latin America.
Authors: Ramon Paulino, Rafaela Pereira Nunes, Cansu Tayaksi, Josue Velazquez Martinez
How Survival of Micro Retail Companies Affects Logistics Costs in Large Consumer Packaged Goods Companies
Abstract: In developing economies, many mom-and-pop stores disappeared per year due to a lack of productivity, while many others appeared because of the low barrier of entry. Therefore, the overall micro-retailing market grows per year and represents from 40-70% of the demand for large CPG companies. In this paper, we study the impact of these dynamics on logistics costs. We discuss a practical case for a distributor in Mexico City, and by using cost-to-serve estimations and continuous approximation models for routing; we show that by improving survival rate, we may avoid losses in logistics costs up to 30%.
Authors: Ximena Castanon Choque, Josue Velazquez Martinez, Christopher Mejia Argueta
Sustainability
A Performance Measurement System for Green Supply Chain Performance Evaluation
Abstract: In this study, we develop a fuzzy-rule-based performance measurement system to evaluate the performance measures for both green supply chain management practices implementation and performance outcomes. To construct the performance measurement system, a comprehensive literature review is initially conducted to investigate various green supply chain initiatives. Structural equation modeling is used to categorize measures and then a fuzzy membership function is designed for evaluation purpose. The applicability of the developed performance measurement system is evaluated using a real case study in the Malaysian manufacturing industry.
Authors: Nima Kazemi, S. Maryam Masoumik
Farmer Engagement with Markets in Rural Uganda
Abstract: To understand agricultural markets in Uganda, we surveyed farmers and nearby agribusinesses to explore their engagement. We purposively selected 5 districts, randomly chose 2x2km areas, identified households using satellite imagery, and randomly visited households. The survey results characterize behaviors, relationships, and conditions regarding farmer engagement with markets. The further analysis explores the barriers for farmers not connected to the market and how agribusiness help farmers engage in the market. We close with recommendations for market facilitation efforts that support supply chain actors to grow their business and address farmers’ challenges.
Authors: Micaela Wiseman, Courtney Blair, Tim Russell, Jarrod Goentzel
Humanitarian Response
Modeling the Value of Agents in Supply Chains of Malaria Rapid Diagnostic Test Kits with Decision Analysis
Abstract: Malaria poses one of the greatest challenges to global health. Accurate diagnosis, with rapid diagnostic tests (RDTs), is critical because presumptive treatment of malaria wastes resources and increases the risk of drug resistance. In this project, we developed a value model for the agents along the RDT kit supply chain in Uganda. The model, based on multi-attribute value theory, enables an understanding of the motivations of each agent in the supply chain. The analysis identified a new package of incentives that proved to be robust against the variation of the relevance of agents in the chain.
Authors: Corinne Carland, Jarrod Goentzel, Gilberto Montibeller
Effects and Mitigation of Natural Hazards in Retail Networks
Abstract: Knowing the impact of natural hazards is crucial to invest in mitigation. We cross sales and inventory from a retail network with emergency management data to quantify the variability in product and financial flows. We propose a two-stage multi-period inventory flow stochastic program to plan investment in buffer stock or real options contracts with suppliers that execute in declared emergencies. We show that a risk-averse approach reduces worst-case cost by 15% while increasing average cost by 2%. We close by showing how various risk profiles shape the nature of investments.
Authors: Jorge García Castillo, Jarrod Goentzel
Performance Metrics For Emergency Response Network Design
Abstract: We use a stochastic linear program to model a US-based emergency response organization's network of warehouses to serve sudden-onset disasters. We develop multiple performance measures to characterize the risk portfolio, the supply portfolio, and the carrier portfolio to support decision-makers in evaluating the status-quo of their operations and suggest areas of improvement. We show how our model and the measures work with data from our case.