Knowledge that Transforms

The continued success of Manufacturing & Service Operations Management (M&SOM) depends on the volunteer work of many professionals who take their precious time to provide careful and constructive reviews of the manuscripts submitted to the journal in a timely manner. On behalf of M&SOM, Editor-in-Chief Georgia Perakis expresses her deepest gratitude to all those who served as reviewers for the journal in 2021. Among all reviewers, some individuals have distinguished themselves by reviewing several manuscripts and, with each manuscript, by writing a fair, critical, and constructive review in a timely fashion. In recognition of their outstanding service provided to support the journal’s scholarly mission, M&SOM grants the 2021 Meritorious Service Award to…

Problem definition: We study profit allocation for a sourcing network, in which a buyer sources from a set of differentiated suppliers with limited capacity under uncertain demand for the final product. Whereas the buyer takes the lead in forming the sourcing network and designing the contract mechanism, due to their substantial bargaining power, the suppliers take the lead in determining the terms of the contract. Academic/practical relevance: We identify contracting mechanisms that will ensure the stability of the sourcing network in the long term, where a stable sourcing network requires an effective profit-allocation scheme that motivates all members to join and stay in the network. Methodology: We apply methods from game theory to model the network and analyze the Nash equilibrium of a noncooperative game under a proposed contracting mechanism. We then use a cooperative game model to study the stability of the resulting equilibrium. Results: We show that the optimal network profit, as a set function of the set of suppliers, is submodular, which allows us to demonstrate that the core of the cooperative game is not empty. We also establish a set of conditions that are equivalent to, but much simpler than, the original conditions for the core. We use these results to demonstrate that the proposed fixed-fee contracting mechanism can implement a stable network in the competitive setting by achieving a profit allocation that is in the core of the cooperative game. We also demonstrate that the grand coalition is stable in a farsighted sense under the Shapley value allocation. Managerial implications: Under the fixed-fee mechanism, the buyer’s decisions maximize the network profit, and each supplier earns a profit equal to its marginal contribution. When the aggregate capacity of the supplier network is high relative to demand, or demand is more likely to be small, the fixed-fee mechanism is likely to outperform the Shapley value allocation from the perspective of the buyer.

The journal is pleased to publish the abstracts of the six finalists of the 2021 Manufacturing and Service Operations Management Society’s student paper competition. The 2021 prize committee was chaired by Vishal Agrawal (Georgetown University), Florin Ciocan (INSEAD), and Yanchong Zheng (Massachusetts Institute of Technology). The judges were Adam Elmachtoub, Adem Orsdemir, Amrita Kundu, Antoine Desir, Anyan Qi, Arian Aflaki, Arzum Akkas, Ashish Kabra, Bin Hu, Bora Keskin, Brent Moritz, Can Zhang, Chloe Kim Glaeser, Dan Iancu, Daniel Freund, Daniel Lin, Daniela Saban, David F. Drake, Dawson Kaaua, Divya Singhvi, Ekaterina Astashkina, Elena Belavina, Elodie Adida, Enis Kayis, Ersin Korpeoglu, Evgeny Kagan, Fabian Sting, Fanyin Zheng, Fei Gao, Fernanda Bravo, Francisco Castro, Georgina Hall, Gonzalo Romero, Guangwen Kong, Guoming Lai, Hamsa Bastani, Hessam Bavafa, Hummy Song, Ioannis (Yannis) Stamatopoulos, Ioannis Bellos, Iris Wang, Jake Feldman, Jason Acimovic, Jiankun Sun, Jiaru Bai, John Silberholz, Joline Uichanco, Jonas Oddur Jonasson, Jose Guajardo, Kaitlin Daniels, Kenan Arifoglu, Lennart Baardman, Leon Valdes, Lesley Meng, Luyi Gui, Luyi Yang, Mary Parkinson, Mazhar Arikan, Mehmet Ayvaci, Miao Bai, Michael Freeman, Ming Hu, Morvarid Rahmani, Mumin Kurtulus, Nan Yang, Nektarios Oraiopoulos, Nikhil Garg, Nil Karacaoglu, Nitin Bakshi, Nur Sunar, Olga Perdikaki, Ovunc Yilmaz, Ozan Candogan, Ozge Sahin, Panos Markou, Pascale Crama, Pengyi Shi, Pnina Feldman, Qiuping Yu, Renyu Zhang, Ruslan Momot, Ruth Beer, Ruxian Wang, Saed Alizamir, Safak Yucel, Samantha Keppler, Sanjith Gopalakrishnan, Santiago Gallino, Sarah Yini Gao, Sebastien Martin, Serdar Simsek, Seyed Emadi, Shima Nassiri, Shouqiang Wang, Siddharth Singh, Simone Marinesi, So Yeon Chun, Somya Singhvi, Song-Hee Kim, Soo-Haeng Cho, Soroush Saghafian, Sriram Dasu, Stefanus Jasin, Stephen Leider, Suresh Muthulingam, Suvrat Dhanorkar, Tian Chan, Tim Kraft, Tom TAN, Tugce Martagan, Velibor Misic, Vishal Gupta, Weiming Zhu, Xiajun Amy Pan, Xiaoshan Peng, Xiaoyang Long, Yangfang (Helen) Zhou, Yehua Wei, Yiangos Papanastasiou, Ying-Ju Chen, Yinghao Zhang, Yoni Gur, Yuqian Xu, Zhaohui (Zoey) Jiang, Zumbul Atan.

Problem definition: We consider the problem of resolving ad hoc unpredictable congestion in environments where customers have private time valuations. We investigate the design of fair, efficient, budget-balanced, and implementable bidding mechanisms for observable queues. Academic/practical relevance: Our primary motivation comes from merging in algorithmic traffic, i.e., a driver wishing to merge in a relatively dense platoon of vehicles in a coordinated and efficient way, using intervehicle communication and micropayments, akin to an arriving customer trading for position in a single-server observable queue. Methodology: We analyze the performance of a mechanism where the queue joiner makes sequential take-it-or-leave-it bids from tail to head (T2H) of a platoon, with the condition that the vehicle can advance to the next position only if it wins the bid. This mechanism is designed so that it is implementable, balances the budget, and imposes no negative externalities. Results: We compared this mechanism with head to tail (H2T) bidding, which favors the merging driver but potentially causes uncompensated externalities. Assuming i.i.d. time valuations, we obtain the optimal bids, value functions, and expected social welfare in closed form in both mechanisms. Moreover, if the time valuation of the merging driver is not high, we show that the expected social welfare of T2H is close to a partial information social optimum and that the expected social welfare of H2T is lower than that of T2H as long as the platoon is not too short. Managerial implications: Our findings suggest that mechanisms based on sequential take-it-or-leave-it bids from T2H of an observable queue have good social welfare performance, even if the corresponding bids are not chosen optimally, as long as the time valuation of the arriving customer is not high. Nevertheless, the tension between individual incentives and social welfare seems hard to resolve, highlighting the role of platforms to enforce the cooperation of involved parties.

Problem definition: Treating many blood-related diseases requires transplantation of genetically compatible hematopoietic stem cells (HSCs) extracted from the bone marrow (BM) of live donors or the umbilical cord blood (CB) of babies. To facilitate the search for HSCs, institutions known as BM registries collect the details of potential donors and CB banks store units of CB. This paper focuses on the problem of joint optimization of the capacity of these two institutions. Academic/practical relevance: With more than 10 million genetic variants, limited inventory relative to this variety, and random replenishment, BM registry and CB bank compositions are random, interdependent, and change nondeterministically over time. Furthermore, BM and CB differ in their supply, costs, genetic matching criteria, and influences on medical outcomes, giving rise to important tradeoffs such that neither is preferred exclusively to the other. Jointly determining the optimal capacity of both sources is therefore both technically challenging and has immediate policy implications. Methodology: We develop a simulation-based approach to estimate the temporal variation in matching probabilities before incorporating the associated regression parameters into a mathematical model closely matching the research context. Results are contrasted against a simplified mathematical model, highlighting the importance of the dynamic setup. Results: Inventories of 17.5 million registered BM donors and 335,000 CB units are estimated as optimal for the U.S. population under reasonable assumptions. Expanding capacity to these levels would satisfy 33% of the currently unmet demand, increasing the transplantation rate to 98.7% and delivering $770 million of extra social surplus annually. Managerial implications: Rigorous policy analyses are imperative for designing evidence-based, cost-effective policies that deliver societal benefits. To this end, we provide quantitative evidence in support of calls for further expansion of the national BM registry and CB banks in the United States. We also propose annual recruitment targets for BM donors and CB units to maintain the two institutions at their suggested levels. History: This paper has been accepted for the Manufacturing & Service Operations Management Special Section on Responsible Research in Operations Management.

Problem definition: We study the combined value of observing future demand realizations (partial demand visibility) and flexible capacity, two hedging mechanisms against demand uncertainty, when signing capacity contracts with short temporal commitment. Academic/practical relevance: With new technological innovations, short commitment contracts are found in dynamic environments like distribution, processing, and manufacturing, a trend likely to grow in the future. In contrast to classic procurement, where commitments are long, short commitments lead to new dynamics in which demand visibility allows companies to use flexible resources more efficiently by adapting to demand observations. Methodology: We incorporate flexible capacity and demand visibility simultaneously using a multiperiod newsvendor network model with two nodes that are supplied using dedicated and flexible capacity contracts with short temporal commitment. Results: The optimal commitment to capacity contracts adapts within bounds to the observed demand at each node. The ability to adapt to visible demand becomes more valuable when flexible capacity contracts are available. This allows us to show that demand visibility and flexible capacity can act as complements. Managerial implications: In contrast to conventional wisdom, when contracts have short commitment, companies can enhance the value of demand visibility if flexible capacity is also available as an option.

Problem definition: Managers in ad agencies are responsible for delivering digital ads to viewers on behalf of advertisers, subject to the terms specified in the ad campaigns. They need to develop bidding policies to obtain viewers on an ad exchange and allocate them to the campaigns to maximize the agency’s profits, subject to the goals of the ad campaigns. Academic/practical relevance: Determining a rigorous solution methodology is complicated by uncertainties in the arrival rates of viewers and campaigns, as well as uncertainty in the outcomes of bids on the ad exchange. In practice, ad hoc strategies are often deployed. Our methodology jointly determines optimal bidding and viewer-allocation strategies and obtains insights about the characteristics of the optimal policies. Methodology: New ad campaigns and viewers are treated as Poisson arrivals, and the resulting model is a Markov decision process, where the state of the system is the number of undelivered impressions in queue for each campaign type in each period. We develop solution methods for bid optimization and viewer allocation and perform a sensitivity analysis with respect to the key problem parameters. Results: We solve for the optimal dynamic, state-dependent bidding and allocation policies as a function of the number of ad impressions in queue, for both the finite horizon and steady-state cases. We show that the resulting optimization problems are strictly concave in the decision variables and develop and evaluate a heuristic method that can be applied to large problems. Managerial implications: Numerical analysis of our heuristic solution shows that its errors are generally small and that the optimal dynamic, state-dependent bidding policies obtained by our model are significantly better than optimal static policies. Our proposed approach is managerially attractive because it is easy to implement in practice. We identify the capacity of the impression queue as an important managerial control lever and show that it can be more effective than using higher bids to reduce delay penalties. We quantify potential operational benefits from the consolidation of ad campaigns, as well as merging ad exchanges.

Problem definition: Bargaining situations are ubiquitous in economics and management. We consider the problem of bargaining for a fair ex ante distribution of random profits arising from a cooperative effort of a fixed set of risk-averse agents. Our approach integrates optimal managerial decision making into bargaining situations with random outcomes and explicitly models the impact of risk aversion. The proposed solution rests on a firm axiomatic foundation and yet allows to compute concrete bargaining solutions for a wide range of practically relevant problems. Methodology/results: We model risk preferences using coherent acceptability functionals and base our bargaining solution on a set of axioms that can be considered a natural extension of Nash bargaining to our setting. We show that the proposed axioms fully characterize a bargaining solution, which can be efficiently computed by solving a stochastic optimization problem. We characterize special cases where random payoffs of players are simple functions of overall project profit. In particular, we show that, for players with distortion risk functionals, the optimal bargaining solution can be represented by an exchange of standard options contracts with the project profit as the underlying asset. We illustrate the concepts in the paper with a detailed example of risk-averse households that jointly invest into a solar plant. Managerial implications: We demonstrate that there is no conflict of interest between players about management decisions and that risk aversion facilitates cooperation. Furthermore, our results on the structure of optimal contracts as a basket of option contracts provides valuable guidance for negotiators.

Problem definition: We consider the rostering decisions—that is, the assignment of workers scheduled for a shift to units—of a long-term care facility. The facility’s objective is to minimize the monthly inconsistency level, a widely promoted quality metric representing the number of different caregivers working in each unit over one month. Methodology/results: We introduce simple rostering heuristics that prioritize either part-time or full-time workers and present a stochastic model of the repeated rostering problem to compare the performance of different strategies analytically. Our analysis shows that in order to minimize the inconsistency level, part-time workers should receive higher priority than full-time workers for assignment to their home units. We also establish an analytical upper bound for a threshold on the time horizon above which a policy giving assignment priority to part-time workers is guaranteed to outperform one giving priority to full-time workers. Using data from more than 15,000 shifts worked by nursing assistants at three nursing homes, we compare the actual rosters to the hindsight optimal consistency-maximizing schedules, demonstrating a significant opportunity for improvement. We then compare the performance of our rostering heuristics via trace-based simulation of the historical schedules. This reinforces the superiority of prioritizing part-time workers, yielding reductions in the inconsistency level between 20% and 30% compared with the historical rosters. Managerial implications: Contrary to popular guidance, our results show that managers should focus on part-time workers and assign them as consistently as possible. Even if some full-time workers are always assigned to their home units (because of preferences or work rules), assignment flexibility among the remaining full-time workers still enables significant improvements in the consistency of care. This flexibility among full-time workers helps because their higher work frequency tends to make a reassignment away from their home unit contribute less to inconsistency, because they are able to work multiple shifts in these nonhome units.