2015 Informs Annual Meeting

TC50

INFORMS Philadelphia – 2015

1 - Quality at the Source or Quality at the End? Managing Supplier’s Quality under Information Asymmetry Mohammad Nikoofal, Católica Lisbon School of Business & Economics, UCP, Palma de Cima, Lisbon, 1649-023, Portugal, mohammad.nikoofal@ucp.pt In this paper, we first develop and then compare two different mechanisms for the buyer in order to control quality improvement efforts exerted by the supplier when the supplier has private information about his inborn reliability. 2 - Optimal Monitoring Decisions for Asset Based Lending Nikolaos Trichakis, Harvard Business School, Boston, MA, United States of America, HBS, ntrichakis@hbs.edu, Dan Iancu, Do Young Yoon We consider a firm financing its operations by collateralizing its working assets, e.g., inventory. To mitigate the risk due to the assets’ uncertain valuation, the lender has a monitoring option entitling him to early repayment by liquidation. We derive the optimal liquidation policy, showing that it can have a nonthreshold structure. We derive bounds on the optimal monitoring time, and leverage them to devise simple heuristics, which perform well in numerical studies. 3 - Capital Structure with Flexible Future Investments Qi Wu, Case Western University, Cleveland, OH, United States of America, Weatherhead School of Management, CWRU, qxw132@case.edu, Peter Ritchken We analyze the interaction between investment and financing decisions in a dynamic contingent claims model where the firm has the ability to dynamically control production decisions of assets in place and has growth options to invest in that can be financed with debt and equity. The fundamental question to be addressed is how investment timing and financing decisions are affected by the existing capital structure and the nature of the operating flexibility inherent in the growth options. 4 - Make-to-Order vs. Make-to-Stock when Firms Compete, Input Costs, and Demand are Stochastic Danko Turcic, Associate Professor of Operations, Olin Business School, Washington University in St. Louis, St. Louis, MO, United States of America, turcic@wustl.edu, Guang Xiao, Panos Kouvelis This paper provides a new rationale for why firms choose long and short production lead times that is based, in part, on non-competitive behavior in product markets. We identify a set of conditions, which imply that some, otherwise identical, production firms want to choose long production lead times, while others choose short production lead times. The conditions are: (i) stochastic production costs, (ii) price-dependent demand, and (iii) strategic inventory withholding. TC49 49-Room 105B, CC Multi-Echelon Inventory Modeling Sponsor: Manufacturing & Service Oper Mgmt/Supply Chain Sponsored Session Chair: Sean Willems, University of Tennessee, 453 Haslam Business Building, Knoxville, TN, 37996, United States of America, willems@bu.edu 1 - Velocity-based Storage in a Semi-automated Order Fulfillment System Stephen Graves, MIT, 77 Massachusetts Avenue, Cambridge, MA, 02139, United States of America, sgraves@mit.edu, Rong Yuan Online retailers continue to invest in technology to improve the efficiency of order fulfillment. This technology creates new operating challenges and opportunities. We examine a semi-automated fulfillment system in which pickers and stowers are stationary, and the inventory storage units are brought to them. We evaluate the effectiveness of velocity-based storage and consider how to deploy a velocity-based storage policy in light of picking, stowing and storage decisions. 2 - Incorporating an Operational Layer into the Guaranteed-service Inventory Optimization Approach Steffen Klosterhalfen, University of Richmond, 1 Gateway Road, The existing guaranteed-service contributions assume bounded demand and do not explicitly model how excess demand is handled by some type of flexibility measure. The lack of a clear operational description leaves the material flow representation somewhat incomplete and renders the approach controversial. We incorporate operating flexibility in the form expediting. By doing so we can work directly with the external (unbounded) demand and the entire material flow is easy to trace and understand. Richmond, VA, 23173, United States of America, steffenklosterhalfen@googlemail.com, Daniel Dittmar

3 - Multi-item Spare Parts Inventory Planning with Selective use of Advance Demand Information Geert-Jan Van Houtum, Full Professor, Eindhoven University of Technology, P.O. Box 513, Eindhoven, 5600MB, Netherlands, g.j.v.houtum@tue.nl, Tarkan Tan, Engin Topan We propose a multi-item, spare parts inventory system model with a general representation of imperfect demand information. We determine which parts should be monitored and how much stock should be kept for each component so that a given aggregate system availability is maintained. Our model allows excess inventory on stock and on order to be returned to the central depot or external supplier at a certain return cost. We also characterize the optimal ordering and return policy. TC50 50-Room 106A, CC Operations Economics Sponsor: Manufacturing & Service Operations Management Sponsored Session Chair: Terry Taylor, U.C. Berkeley, Haas School of Business, 2220 Piedmont Avenue, Berkeley, CA, United States of America, taylor@haas.berkeley.edu Co-Chair: Wenqiang Xiao, Associate Professor, New York University, Stern School of Business, 44 West Fourth Street, 8-72, New York, NY, Lusheng Shao, University of Melbourne, Melbourne, Australia, lusheng.shao@unimelb.edu.au, Xiaole Wu, Fuqiang Zhang This paper studies two firms’ outsourcing strategies under competition and asymmetric cost information. We find that without asymmetric information, the firms will choose the supplier with smaller cost uncertainty. However, with information asymmetry, the supplier with greater cost uncertainty may be preferred. 2 - Information Preferences in the Supply Chain under Strategic Inventory Abhishek Roy, PhD Student, McCombs School of Business, University of Texas at Austin, 2110 Speedway Stop B6500, Austin, TX, 78712, United States of America, abhishek.roy@utexas.edu, Steve Gilbert, Guoming Lai We investigate how the possibility of strategic inventory influences the preferences for information sharing between supply chain partners. Among other results, we show that the presence of strategic inventory may alter traditional information preferences of the supply chain partners regarding the creation of a mechanism for sharing information about the retailer’s operation with the supplier. 3 - Product Quality in a Distribution Channel with Inventory Risk We analyze a situation in which a product has to be designed and sold under demand uncertainty. We consider the jointly optimal quality and inventory decision in both a centralized channel (a single firm determines both) and a decentralized channel (a manufacturer determines quality while a retailer determines inventory), and discuss how demand uncertainty impacts the optimal quality-inventory pair and how coordination of the decentralized channel may be achieved. 4 - Congested Platforms Terry Taylor, U.C. Berkeley, Haas School of Business, 2220 Piedmont Avenue, Berkeley, CA, United States of America, taylor@haas.berkeley.edu In a platform business model, the platform firm provides a per-service wage payment to independent agents (e.g., drivers in riding-sharing services (e.g., Uber), shoppers in delivery services (e.g., Instacart)) to motivate them to provide service to customers. This paper using a queueing model to examine the impact of congestion on the platform’s optimal price and wage. 10012, United States of America, wxiao@stern.nyu.edu 1 - Strategic Outscouring under Competition and Asymmetric Information Kinshuk Jerath, Columbia University, 521 Uris Hall, 3022 Broadway, New York, NY, 10027, United States of America, jerath@columbia.edu, Sang Kim, Robert Swinney

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