Showing papers in "Interfaces in 2007"
TL;DR: It is discovered that many organizations would improve forecast accuracy if they followed basic principles such as limiting judgmental adjustments of quantitative forecasts, requiring managers to justify their adjustments in writing, and assessing the results of judgmental interventions.
Abstract: Accurate forecasts are crucial to successful organizational planning. In 2001, 40 international experts published a set of principles to guide best practices in forecasting. Some of these principles relate to the use of management judgment. Most organizations use judgment at some stage in their forecasting process, but do they do so effectively? Although judgment can lead to significant improvements in forecasting accuracy, it can also be biased and inconsistent. The principles show how forecasters should use judgment and assess its effectiveness. We conducted a survey of 149 forecasters to examine the use of judgment based on these established principles and to investigate whether their forecasting procedures were consistent with the principles. In addition, we conducted four in-depth case studies. Although we found examples of good practice, we also discovered that many organizations would improve forecast accuracy if they followed basic principles such as limiting judgmental adjustments of quantitative forecasts, requiring managers to justify their adjustments in writing, and assessing the results of judgmental interventions.
192 citations
TL;DR: An algorithm using an emerging technique known as very large-scale neighborhood (VLSN) search that is able to solve the railroad blocking problem to near optimality using one to two hours of computer time on a standard workstation computer is developed.
Abstract: Each major US railroad ships millions of cars over its network annually. To reduce the intermediate handlings of shipments as they travel over the railroad network, a set of shipments is classified (or grouped together) at a railroad yard to create a block. The railroad blocking problem is to identify this classification plan for all shipments at all yards in the network to minimize the total shipment cost, i.e., to create a blocking plan. The railroad blocking problem is a very large-scale, multicommodity, flow-network-design and routing problem with billions of decision variables. Its size and mathematical difficulty preclude solving it using any commercial software package. We developed an algorithm using an emerging technique known as very large-scale neighborhood (VLSN) search that is able to solve the problem to near optimality using one to two hours of computer time on a standard workstation computer. This algorithm can also handle a variety of practical and business constraints that are necessary for implementing a solution. When we applied this algorithm to the data that several railroads provided us, the computational results were excellent. Three Class I railroad companies (a Class I railroad, as defined by the Association of American Railroads, has an operating revenue exceeding $319.3 million) in the United States---CSX Transportation, Norfolk Southern Corporation, and Burlington Northern and Santa Fe Railway---used it in developing their operating plans. Two US Class I railroads have also licensed it for regular use in developing their operating plans, and other railroads are showing considerable interest. We expect this algorithm to become an industry standard for freight railroads worldwide. In this paper, we outline our algorithm, show the computational results we received using real data, and describe areas for future research.
136 citations
TL;DR: The scheduling of nursing staff is a long-standing problem with myriads of research models published by academia and the models that hospitals have actually used, and causes for the research-application gap are examined.
Abstract: The scheduling of nursing staff is a long-standing problem with myriads of research models published by academia. The exploratory research that we discuss examines the models that academia has produced and the models that hospitals have actually used. We use data from many sources, including research articles, e-mail and telephone surveys, an industry database, and a software source catalog. Only 30 percent of systems that research articles discuss are implemented, and there is very little academic involvement in systems that third-party vendors offer. We examine causes for the research-application gap and discuss directions for future academic research to make it more applicable.
111 citations
TL;DR: Since 2005, Chile's professional soccer league has used a game-scheduling system that is based on an integer linear programming model that has completely fulfilled the expectations of the Asociacion Nacional de Futbol Profesional (ANFP), the organization for Chilean professional soccer.
Abstract: Since 2005, Chile's professional soccer league has used a game-scheduling system that is based on an integer linear programming model. The Chilean league managers considered several operational, economic, and sporting criteria for the final tournaments' scheduling. Thus, they created a highly constrained problem that had been, in practice, unsolvable using their previous methodology. This led to the adoption of a model that used some techniques that were new in soccer-league sports scheduling. The schedules they generated provided the teams with benefits such as lower costs, higher incomes, and fairer seasons. In addition, the tournaments were more attractive to sports fans. The success of the new scheduling system has completely fulfilled the expectations of the Asociacion Nacional de Futbol Profesional (ANFP), the organization for Chilean professional soccer.
70 citations
TL;DR: The Norwegian company Omya Hustadmarmor supplies calcium carbonate slurry to European paper manufacturers from a single processing plant, using chemical tank ships of various sizes to transport its products, and the development of a decision-support system (DSS) for maritime inventory routing helps planners to make stronger, faster decisions.
Abstract: The Norwegian company Omya Hustadmarmor supplies calcium carbonate slurry to European paper manufacturers from a single processing plant, using chemical tank ships of various sizes to transport its products. Transportation costs are lower for large ships than for small ships, but their use increases planning complexity and creates problems in production. In 2001, the company faced overwhelming operational challenges and sought operations-research-based planning support. The CEO, Sturla Steinsvik, contacted More Research Molde, which conducted a project that led to the development of a decision-support system (DSS) for maritime inventory routing. The core of the DSS is an optimization model that is solved through a metaheuristic-based algorithm. The system helps planners to make stronger, faster decisions and has increased predictability and flexibility throughout the supply chain. It has saved production and transportation costs close to US$7 million a year. We project additional direct savings of nearly US$4 million a year as the company adds even larger ships to the fleet as a result of the project. In addition, the company has avoided investments of US$35 million by increasing capacity utilization. Finally, the project has had a positive environmental effect by reducing overall oil consumption by more than 10 percent.
65 citations
TL;DR: In this article, the authors conducted a field study with GENCO, a third-party logistics company that deployed RFID in the outbound logistics operations at one of its return centers and found that the RFID implementation had a significant impact on the GENCO outbound process.
Abstract: As many manufacturers, retailers, distributors, and logistics firms adopt RFID, the technology is becoming pervasive in the supply chain. Although its advocates include retail giants such as Wal-Mart, not all companies are enthusiastic about its benefits. It is not clear whether RFID is a boon or a curse to the supply chain---its market growth may just be an issue of compliance. To establish the real benefits of RFID, we conducted a field study with GENCO, a third-party logistics company that deployed RFID in the outbound logistics operations at one of its return centers. Our analysis found that the RFID implementation had a significant impact on the GENCO outbound process. The number of customer claims fell substantially following the RFID deployment. After controlling for other factors in our model, we confirmed that RFID was a key factor that contributed to the positive results at this return center. The current study underscores the potential of RFID for today's businesses.
53 citations
TL;DR: A two-step method of constructing a four-week maintenance schedule in which each working zone of the main lines is closed to trains at night exactly once is developed, which is unique in Europe.
Abstract: After several fatal accidents, improving the safety of rail-track workers became a political priority in The Netherlands. Maintaining the track was one of the most dangerous jobs in the country. ProRail divides its infrastructure into working zones to be taken out of service during maintenance. We developed a two-step method of constructing a four-week maintenance schedule in which each working zone of the main lines is closed to trains at night exactly once. The alterations in trains' departure and arrival times are within the restrictions imposed by train operators. Workers have accepted the resulting schedule, which provides them with a manageable maximum workload per night. Such a schedule is unique in Europe. It has been in operation since 2000 and has clearly proven its benefits.
43 citations
TL;DR: An integer-programming-based computerized method for forming teams achieves equity in team members' academic performance, functional diversity, and demographic balance and is perceived as fairer than the previous method.
Abstract: We used integer programming to form student teams for case studies in the integrated core courses at Indiana University. The previous assignment method achieved academic balance but was time consuming and limited. We developed and implemented an integer-programming-based computerized method for forming teams. It achieves equity in team members' academic performance, functional diversity, and demographic balance. Students perceived the system as fairer than the previous method, and it forms teams of students that work better together. Students complain less about other team members, and the students and the instructors report improvement in their experience. Indiana University's Kelley School of Business has adopted the integer-programming method for forming the teams for its I-core group of four courses.
38 citations
TL;DR: The model is applied to the Celanese acetic acid supply chain and it is shown that inventory metrics of the new model differ by more than 30 percent from those derived through the simpler modeling approach of aggregating a review period into lead time.
Abstract: We extend the guaranteed service, supply chain modeling framework to allow for an arbitrary, integer review period or ordering frequency at each stage. We define a notation for the cyclic inventory dynamics that review periods introduce and generalize inventory-balance equations to accommodate three different periodic-review operating policies---constant base stock, constant safety stock, and adaptive base stock. As a form of validation, we apply the model to the Celanese acetic acid supply chain and show that inventory metrics of the new model differ by more than 30 percent from those derived through the simpler modeling approach of aggregating a review period into lead time.
38 citations
TL;DR: The ENM has helped Travelocity become a more effective retailer and has contributed over $54 million to Travelocity earnings, at a current rate of $43 million per year.
Abstract: In 2002, Travelocity lost revenue and market share to competition as the business environment changed. Travelocity and Sabre collaborated to develop the enterprise network model (ENM). The ENM combines discrete choice customer modeling with simulation and large-scale optimization to improve Travelocity's management supplier agreements, customer marketing, and product pricing. The ENM has helped Travelocity become a more effective retailer and has contributed over $54 million to Travelocity earnings, at a current rate of $43 million per year.
34 citations
TL;DR: This work introduces the concept of a sequencing point, which is defined as where component variants are placed in the sequence that final assembly requires, and discusses the implications of alternative sequencing-point-location strategy on management of product variety.
Abstract: In recent years, globalization of markets and increased consumer sophistication have led to an increase in the variety of products that customers demand and a consequent increase in the number of variants of any given product line that a manufacturer must supply. At the same time, an increasing number of companies have pushed the task of accommodating product variety up the supply chain to suppliers. This makes it increasingly difficult to understand where and how variety is accommodated. Based on our study of the automotive industry, we introduce the concept of a sequencing point, which we define as where component variants are placed in the sequence that final assembly requires. We discuss the implications of alternative sequencing-point-location strategy on management of product variety. For each strategy, we discuss associated trade-offs and provide short case studies.
TL;DR: It is suggested that firms in this sector have taken the first step by becoming competitive in the areas of cost and quality and must make several choices to leverage these quality gains into a profitable, global supply chain strategy.
Abstract: We trace the evolution of the auto-component supply chain in India beginning with the opening of the economy in 1990 by using a combination of data on firm and sector performance, customer-satisfaction surveys, and interviews with experts. During the past decade, the industry has made remarkable progress on multiple fronts. This is particularly true with regard to quality---10 firms in this industry have won the coveted Deming prize during the past six years. Surprisingly, we first observe that the financial performance of the firms that won the Deming prize (i.e., Deming firms) shows no definitive differences from the performance in the rest of the industry. We then analyze the productivity growth at the firm level across two five-year intervals using a total-factor productivity model. Our results suggest that productivity improved much more during the second period, which is the interval in which most of the firms won the Deming prize. We also analyze the impact of winning the award on profitability and suggest that new firms were able to grow faster in the improving business environment. To “externally” validate our findings, we compare the auto sector in India with that in China. Despite a 10-year disadvantage because of costs that are beyond the control of the firm, the auto sector in India seems to be competitive with that sector in China on all firm-specific factors. In summary, we suggest that firms in this sector have taken the first step by becoming competitive in the areas of cost and quality. We suggest that they are now at a crossroads and must make several choices to leverage these quality gains into a profitable, global supply chain strategy.
TL;DR: The authors compared the accuracy of experts and novices in predicting the decisions that will be made in real conflicts and concluded that expert judgment should not be used for predicting decisions that people will make in conflicts.
Abstract: In important conflicts such as wars and labor-management disputes, people typically rely on the judgment of experts to predict the decisions that will be made. We compared the accuracy of 106 forecasts by experts and 169 forecasts by novices about eight real conflicts. The forecasts of experts who used their unaided judgment were little better than those of novices. Moreover, neither group's forecasts were much more accurate than simply guessing. The forecasts of experienced experts were no more accurate than the forecasts of those with less experience. The experts were nevertheless confident in the accuracy of their forecasts. Speculating that consideration of the relative frequency of decisions across similar conflicts might improve accuracy, we obtained 89 sets of frequencies from novices instructed to assume there were 100 similar situations. Forecasts based on the frequencies were no more accurate than 96 forecasts from novices asked to pick the single most likely decision. We conclude that expert judgment should not be used for predicting decisions that people will make in conflicts. When decision makers ask experts for their opinions, they are likely to overlook other, more useful, approaches.
TL;DR: In 2005, Warner Robins Air Logistics Center implemented Critical Chain, an operations research method for project management, to reduce lead time for repairing its C-5 transport aircraft, which took eight months, without using any additional resources.
Abstract: At Warner Robins Air Logistics Center, long lead times for repairing and overhauling aircraft were a serious issue because some models were in short supply. In 2005, the center implemented Critical Chain, an operations research method for project management, to reduce lead time for repairing its C-5 transport aircraft. The implementation took eight months, without using any additional resources. The center returned five additional C-5 aircraft to the US Air Force's operational inventory and generated additional revenue to the Transportation Working Capital Fund estimated at $49.8 million annually. The replacement value for these aircraft is estimated at $2.37 billion. The center is implementing the method for the C-130 and the C-17 cargo aircraft to free up 11 dock spaces. With the additional dock space, the depot can accommodate additional work worth $65 million in 2006. The center expects the additional workload to total $248 million by 2009 (the current C-5 annual operating budget is $295 million). Nonquantifiable benefits include increased responsiveness and casualty avoidance during wartime.
TL;DR: Several related models of warranty inventory systems dedicated to warranty returns are formulated, providing near-optimal inventory-control policies in this complex environment and demonstrating the payoffs that result from reducing production lead times and batching in remanufacturing.
Abstract: Warranty inventory management is a challenge that many companies must confront. Customers return allegedly defective units to a company for replacement or credit. The company can then economically recover the unit through either a testing or remanufacturing process; it can use recovered units to fulfill future warranty requests. The company also has the option of purchasing a new product from the production line. In high-volume situations, warranty inventory management involves many complexities such as stochastic demand rates, probabilistic requests for credit instead of replacement, probabilistic repairs, multiple sources of supply, and tight customer-service constraints. Companies may also have to consider the complexities that a batch remanufacturing process causes.
In this paper, we formulate several related models of such warranty inventory systems. In these models, we study a periodic, single-location, inventory system that is dedicated to warranty returns. We find near-optimal policies for each system using well-developed heuristics. The models include the following complexities: random warranty claims, random requests for replacement or credit, three sources of supply (testing, remanufacturing, and new product), random flows of returned products into testing and remanufacturing, random yields from testing and remanufacturing, different lead times for each resupply process, remanufacturing lead time variability, and random batching of remanufacturing. The results of the models provide near-optimal inventory-control policies in this complex environment and demonstrate the payoffs that result from reducing production lead times and batching in remanufacturing.
Hitachi GST has gained a great deal from this modeling process. In addition to the direct benefit from the model's calculations, additional sensitivity analyses have shed light on the quantitative importance of various factors, including demand volatility, the percentage of credit requests, the percentage of units successfully remanufactured, and batching effects in remanufacturing.
TL;DR: As most businesses do not benefit directly from published research, increasing researchers' collaboration with organizations that transform inventory-control research into implementable real-world solutions is one way of reducing the disconnect.
Abstract: With the widening disconnect between inventory-control research and practice, people debate the value of incremental theory building. While practitioners make decisions in a complex and uncoordinated environment, researchers often adopt a simplistic environment for the sake of rigorous analysis. The stakeholders' mismatched objectives and motivations may cause this lack of synergy. Controlling and reducing this disconnect would benefit both practitioners and researchers. The existing empirical analysis of companies' business improvements based on academic inventory-management theories is inconclusive. Even so, some businesses have successfully implemented inventory theory; however, in most cases, they have greatly modified the inventory models developed by academics. The additional effort required testifies to the gap between inventory-control research and practice. As most businesses do not benefit directly from published research, increasing researchers' collaboration with organizations that transform inventory-control research into implementable real-world solutions is one way of reducing the disconnect.
TL;DR: A system to qualify potential partnerships for one such trade show, the World Wine Market, is created by formulating a mixed-integer program that is an embellished transportation model.
Abstract: Wineries must find distributors to represent their wines, and distributors seek interesting wines to sell to clients. Wineries and distributors often form partnerships at trade shows. I created a system to qualify potential partnerships for one such trade show, the World Wine Market, by formulating a mixed-integer program that is an embellished transportation model. I based its parameters on answers to a questionnaire I obtained from a subset of trade-show attendees who were seeking partners. Of 675 possible matches between wineries and distributors, the program recommended 31 as the optimal set of matches. This resulted in an allocation of just over 50,000 cases of wine. Participants provided positive feedback. In addition, the program introduced at least one winery and a corresponding distributor who have formed a profitable, long-term partnership.
TL;DR: A new production-scheduling algorithm is developed, which contains both optimization and heuristic components, to accommodate the twofold increase in product variety, as well as an effective production-volume increase of over 35 percent.
Abstract: Early in 2003, with continually increasing product variety and production volumes, Dell, Inc. had reached the designed capacity limits of one of its main production facilities, the Morton L. Topfer Manufacturing Center (TMC). In 2004, TMC was facing a doubling of the number of product families it produced, with an anticipated degradation in production rates of nearly 20 percent. To help assuage this problem, we developed a new production-scheduling algorithm, which contains both optimization and heuristic components. The algorithm schedules product families on parallel, identical kitting lines to minimize the number of setups required and to reduce downtime and slow time during setups. Because of our work, Dell was able to accommodate the twofold increase in product variety, as well as an effective production-volume increase of over 35 percent. Furthermore, Dell realized a conservative cost avoidance of more than {$}1 million annually, primarily because it saved overtime costs that it would have required, in the absence of our solution, to handle the increases in production volume and product variety. This solution has been in operation at TMC since June 2004.
TL;DR: This is a sea story about using a simple classroom example to save a great deal of money, as well as to convince beginning Postgraduate Naval School operations research students---experienced, skeptical military officers---that mathematical analysis can yield immediate results.
Abstract: This is a sea story about using a simple classroom example to save a great deal of money, as well as to convince beginning Postgraduate Naval School operations research students---experienced, skeptical military officers---that mathematical analysis can yield immediate results. The application is planning a ship's transit from one point to another in a fixed amount of time, given that the ship can operate with one or more of its propulsion plants idled to save fuel. Simple analysis yields nonintuitive results that US Navy shipboard energy-conservation guides overlook. One of the authors (Kline) solved this homework problem as a student and subsequently applied this example when he took command of USS AQUILA, a patrol hydrofoil missile ship. AQUILA achieved results so striking in comparison to her sister ships that the squadron material officer inspected her engineering plant to ensure that no safety settings were being overridden to achieve this record. Kline's spreadsheet decision-support tool was provided to other hydrofoil commanders. A more general version has been conveyed to the US Navy. Considering that our navy spends about a billion dollars per year on fuel for surface-combatant ships alone, this development promises substantial, long-term returns.
“But thou, contracted to thine own bright eyes, Feed'st thy light'st flame with self-substantial fuel.” Shakespeare, Sonnet I
TL;DR: A program based on optimization that automates the scheduling procedure and consistently provides high-quality schedules in as little as 25 percent of the time taken with other methods.
Abstract: Professional tennis organizations, such as the United States Tennis Association (USTA), the Association of Tennis Professionals (ATP), the International Tennis Federation (ITF), and the Women's Tennis Association (WTA), host tennis tournaments throughout the world. At these tournaments, chief umpires assign and schedule line umpires for every match. For most tournaments, they perform this task manually, which can be cumbersome for large tournaments. For large tournaments, such as the US Open, they can use software developed to facilitate scheduling. Unfortunately, the software package currently available often creates suboptimal or infeasible schedules that must be manually adjusted. We developed a program based on optimization that automates the scheduling procedure. Our program consistently provides high-quality schedules in as little as 25 percent of the time taken with other methods.
TL;DR: A codeshareFlight-profitability system that automates the codeshare flight-selection process and chooses a set of codeshare flights that maximizes total system revenue for Delta while satisfying the rules that the alliance, the government, and the airlines' unions have set.
Abstract: Delta Air Lines, Inc., forms alliances with other airlines to expand the network of markets it can serve through a process known as codesharing. Codesharing allows an airline to place its marketing code on an alliance partner's flights. A carrier can then sell these flights, although an alliance partner operates them. Alliances can improve the revenue streams of their members; however, the amount of revenue increase depends significantly on which flights are chosen for codeshare. As alliances have evolved, the number of flights being codeshared has grown, and the rules that airlines must follow have become more complex. The authors have built a codeshare flight-profitability system that automates the codeshare flight-selection process. The system chooses a set of codeshare flights that maximizes total system revenue for Delta while satisfying the rules that the alliance, the government, and the airlines' unions have set. The initial impact of this decision-making tool appears to be promising. Codeshared decisions, which Delta previously made without the benefit of optimization technologies, took one to two days to complete. The new system for choosing codeshared flights seeks to increase Delta's operating revenue by up to $50 M per year while reducing the planning cycle to several hours.
TL;DR: The Highway Corridor Analytic Program (HCAP) is a tool that aids USPS transportation analysts in identifying cost-savings opportunities in the surface-transportation network.
Abstract: The United States Postal Service (USPS) delivers more than 200 billion items per year. Transporting these items in a timely and cost-efficient manner is critical if USPS is to meet its service and financial goals. The Highway Corridor Analytic Program (HCAP) is a tool that aids USPS transportation analysts in identifying cost-savings opportunities in the surface-transportation network. By using HCAP, USPS has saved millions of dollars annually.
TL;DR: The US Coast Guard used the PAWSA model to justify funding for four new vessel traffic service centers and to determine new technology requirements for all commercial vessels using US waters.
Abstract: The US Coast Guard (USCG) is charged with maintaining an acceptable level of safety in US ports and waterways. Allocating resources to solve safety problems is difficult because multiple attributes of a port or waterway affect its safety and determine whether a particular safety measure will improve it. We based the ports and waterways safety assessment (PAWSA) model on multiattribute decision analysis techniques and local experts' and stakeholders' assessments of safety levels and the effects safety alternatives would have on these levels. The USCG used the PAWSA model to justify funding for four new vessel traffic service centers and to determine new technology requirements for all commercial vessels using US waters. The USCG has adopted it as a permanent part of its safety management tool kit.
TL;DR: A clear, three-tier ranking of generals is obtained with George Marshall judged the best US Army general of the 20th century, closely followed by Dwight Eisenhower.
Abstract: The pantheon of 20th century US Army generals contains many great wartime commanders. Military historians have written about their leadership qualities but have not ranked the best generals. We asked 10 experts in US military history to evaluate seven generals---Omar Bradley, Dwight Eisenhower, Douglas MacArthur, George Marshall, George Patton, John Pershing, and Matthew Ridgway---using the analytic hierarchy process in a group setting. We developed a ratings hierarchy, and each participant scored each general. We combined individual pairwise comparisons using the geometric-mean method and a new method based on linear programming and obtained a clear, three-tier ranking of generals with George Marshall judged the best US Army general of the 20th century, closely followed by Dwight Eisenhower.
TL;DR: The United States Commercial Aviation Partnership (USCAP), a group of government and industry stakeholders, combined several operations research methods in an analytical process and model that encompasses the US commercial aviation industry, including travelers, airlines, airports, airline and airport suppliers, government agencies, and travel and tourism entities.
Abstract: The United States Commercial Aviation Partnership (USCAP), a group of government and industry stakeholders, combined several operations research methods in an analytical process and model that encompasses the US commercial aviation industry, including travelers, airlines, airports, airline and airport suppliers, government agencies, and travel and tourism entities. With input from these stakeholders, the model, combining system dynamics and econometrics, evaluates the effects of proposed security measures over 25 years. It enables all stakeholders to share a common understanding of these effects and helps government decision makers to improve security without undue and unforeseen operational and economic impact. The model uses linear and nonlinear programming, single and multivariate regression, system dynamics, econometrics, and Monte Carlo simulation. Since 2004, the government has considered the model results in determining policies for screening and credentialing airport employees, screening passengers and cargo, determining security staffing levels, and charging security fees. All participating stakeholders reviewed each analysis for acceptability. Based on the model's success, they envision extending its use to include nonsecurity policy issues.
September 11, 2001, the day commercial airplanes became weapons of mass destruction, is personal to many of us and has changed our perspectives on our lives and our world. The official death toll in the attacks was 2,986, including the airline passengers and airline crew members, workers and visitors in the World Trade Center and the Pentagon, the police and firefighters, and the 19 hijackers. The US Federal Aviation Administration (FAA) halted all flight operations at the nation's airports for the first time in US history and swiftly grounded the approximately 5,000 commercial aircraft that were in flight. Only military aircraft were flying over the US for the rest of that and the next few days. The events of that day left the airline industry and its supporting companies financially devastated.
TL;DR: A research and development project-valuation model developed for Phytopharm plc, a pharmaceutical development and functional food company based in Cambridgeshire, United Kingdom, is described, which considers the technological risks of product development, as well as the uncertainty of commercial success.
Abstract: We describe a research and development project-valuation model developed for Phytopharm plc, a pharmaceutical development and functional food company based in Cambridgeshire, United Kingdom. Phytopharm uses the model to value the projects in its research and development portfolio, and in licensing negotiations with potential product development and marketing partners. We include different valuation methods, including net present value, decision analysis, and Monte Carlo simulation. We also consider the technological risks of product development, as well as the uncertainty of commercial success. In addition to determining a value for a product in development, the model proposes appropriate licensing contract structures. A typical licensing contract specifies milestone payments and royalties to be paid by the licensee to the licensor. The contract structures adhere to an agreed-upon equitable split of the project value between the two parties. The model also generates critical information during the negotiation meetings, including break-even analyses, trade-offs, and bargaining zones. Phytopharm is currently deploying the model for use with its entire project portfolio.
TL;DR: This work shows how using VBA within Excel to generate and solve large linear programs (LPs) overcomes many of the problems inherent in purely spreadsheet-based models and greatly increases model usability.
Abstract: We discuss the importance of spreadsheets for optimization modeling, including a description of their limitations for large-scale problems We then describe efficient ways to overcome these limits Our approach makes use of Excel's standard functionality but augments Excel with its programming language, Visual Basic for Applications (VBA), where necessary We show how using VBA within Excel to generate and solve large linear programs (LPs) overcomes many of the problems inherent in purely spreadsheet-based models and greatly increases model usability The techniques described were instrumental in our successful development of a large-scale procurement/distribution LP that resulted in savings of approximately $1,000,000 in the first year, with even greater annual savings expected in the future
TL;DR: The Commonwealth Scientific and Industrial Research Organisation has researched, developed, and supplied software, VASS and D-VASS, to solve the static and dynamic aspects of THL's schedule creation and maintenance.
Abstract: Tourism Holdings Limited (THL), with 14 locations in Australia and New Zealand, operates a fleet of approximately 4,000 recreational rental vehicles of many types. It allocates vehicles to bookings centrally. If demand for a particular vehicle type at a location exceeds supply, THL may substitute vehicles of similar types or relocate vehicles from other locations to the location that needs the vehicles. The static problem that THL faces daily is to determine a vehicle schedule that minimizes the tangible and intangible costs of such substitutions and relocations. The dynamic problem is to determine---sometimes as the customer waits---whether a vehicle will be available to cover a potential booking and to incorporate that booking into the schedule. The Commonwealth Scientific and Industrial Research Organisation (CSIRO) has researched, developed, and supplied software, VASS and D-VASS, to solve the static and dynamic aspects of THL's schedule creation and maintenance. This paper describes the THL problem, the systems that CSIRO implemented, and how THL embedded these systems into its operations.
TL;DR: Ball Aerospace, which manufactures highly innovative products, recently implemented a just-in-time (JIT) manufacturing system to reduce costs, improve lead times, and enhance customer satisfaction by investigating batch-sizing decisions under different types of demand patterns.
Abstract: Ball Aerospace, which manufactures highly innovative products, recently implemented a just-in-time (JIT) manufacturing system to reduce costs, improve lead times, and enhance customer satisfaction. The company manufactures under customer requirements that dictate the timing and quantities of sales. In the first phase of our study, we used value stream mapping (VSM), a precursor to implementing JIT, for two products in the company's advanced antenna and video systems division. Using this approach, we reduced the lead times and identified opportunities for improvement in the manufacturing facility. In the second phase, we quantified the trade-off between operational and financial considerations of the JIT implementation. Using detailed data from the facility, we analyzed these trade-offs by investigating batch-sizing decisions under different types of demand patterns. Our analysis provided the company with the input it needed to make resource-allocation decisions and current and planned process improvements under changes in external demand.
TL;DR: A trio of operations research techniques were applied to help SR optimally allocate the production orders across its production-distribution network for minimizing the total landed cost, resulting in a strategic shift in SR's capacity-allocation policies.
Abstract: Standard Register (SR) Company is a 93-year-old firm leading in high-volume print production of forms and print stationery for major US firms. SR is facing the strategic challenge of minimizing the total landed costs to offer competitive pricing in the highly competitive traditional print market segment. We applied a trio of operations research (OR) techniques to help SR optimally allocate the production orders across its production-distribution network for minimizing the total landed cost: (1) regressions to estimate the cost and time efficiency attributes of various printing presses on print jobs of different types; (2) optimization modeling to determine the optimal order-routing strategy; and (3) simulation modeling of the production-distribution network to assess the effectiveness of optimal and heuristic allocation strategies under uncertainty of customer orders and equipment performance. With an estimated potential annual savings of over $10 million across SR's major product segments in the high-volume rotary production business, the study has resulted in a strategic shift in SR's capacity-allocation policies. SR's executive-leadership team has launched system-wide production-distribution improvement initiatives and expedited efforts to build real-time supply chain decision-support capabilities to support this philosophy.