Knowledge that Transforms

Paul Kleindorfer was among the first to weigh in on and nurture the stream of sustainable operations management. The thoughts laid out here are based on conversations we had with Paul relating to t...

Manufacturing & Service Operations Management (M&SOM) depends on the volunteer work of many professionals who take the time to provide careful and constructive reviews of the manuscripts submitted to the journal. In fact, for regular submissions and revisions that were submitted in 2012, M&SOM received 604 reviews from 362 individuals. Remarkably, 55% of those reviews were completed on or before their due date, a figure that increases to 62% if you allow a one-day grace period. Due in large part to the responsiveness of our reviewers, M&SOM made 96.5% of its 399 manuscript decisions for 2012 regular submissions and revisions within 75 days and 100% within 90 days. While we deeply appreciate all those who served as reviewers for the journal in 2012, 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 2012 Meritorious Service Award to….

In this paper, we explore how firms can better manage their sourcing by developing relationships not only with their suppliers but also with their suppliers' suppliers. We detail an empirical case study explaining how the firm developed relationships with its suppliers and raw material suppliers via a collaborative center, the sourcing hub. We then analytically model the scenarios encountered in our empirical work and examine two facets of upstream sourcing under uncertain demand scenarios: (a) firms can supply raw material directly to their suppliers, and this may be beneficial for the firm and its suppliers; and (b) firms can bring their suppliers together at the sourcing hub, and the resulting cooperation between suppliers is beneficial for the suppliers and the raw material suppliers. Overall, our work explores the market and economic conditions under which active management of upstream sourcing can add value to supply chains.

A supply stream is a continuous version of a supply chain. It is like a series inventory system, but stock can be held at any point along a continuum, not just at discrete stages. We assume stationary parameters and aim to minimize the long-run average total cost. We show that a stationary continuous-stage echelon base-stock policy is optimal. That is, at each geographic point along the supply stream, there is a target echelon inventory level, and the optimal policy at all times is to order and dispatch material so as to move the echelon inventory position as close as possible to this target. We establish this result by showing that the solutions to certain discrete-stage systems converge monotonically to a limit, as the distances between the stages become small, and this limit solves the continuous-stage system. With demand approximated by a Brownian motion, we show that, in the continuous-stage limit, the supply stream model is equivalent to one describing first-passage times. This linkage leads to some interesting and useful results. Specifically, we obtain a partial differential equation that characterizes the optimal cost function, and we find a closed-form expression for the optimal echelon base-stock levels in a certain special case, the first in the inventory literature. These expressions demonstrate that the well-known square-root law for safety stock does not apply in this context.

Inventory-based dynamic pricing has become a common operations strategy in practice and has received considerable attention from the research community. From an implementation perspective, it is desirable to design a simple policy like a base-stock list-price (BSLP) policy. The existing research on this problem often imposes restrictive conditions to ensure the optimality of a BSLP policy, which limits its applicability in practice. In this paper, we analyze the dynamic inventory and pricing control problem in which the demand follows a generalized additive model (GAM). The GAM overcomes the limitations of several demand models commonly used in the literature, but introduces analytical challenges in analyzing the dynamic program. Via a variable transformation approach, we identify a new set of technical conditions under which a BSLP policy is optimal. These conditions are easy to verify because they depend only on the location and scale parameters of demand as functions of price and are independent of the cost parameters or the distribution of the random demand component. Moreover, although a BSLP policy is optimal under these conditions, the optimal price may not be monotone decreasing in the inventory level. We further demonstrate our results by applying a constrained maximum likelihood estimation procedure to simultaneously estimate the demand function and verify the optimality of a BSLP policy on a retail data set.

We use a modified optimal market area model to examine how links between material recycling and other aspects of operations strategy can shape plant networks for the processing of recyclable materials. We characterize the complementarity of the recyclate ratio, defined as the maximum recycled content, with material versatility and miniscaling of recycling plants. We also observe that it is beneficial to coordinate investments in recycling- and production-related competencies because colocated recycling and production plants (minimills) eliminate recyclate transport. We therefore consider versatile miniplants, defined as a competency that factors in both material versatility and coordinated miniscaling of recycling and production plants, and capture how it complements both the recyclate ratio and localization of production plants, a competency that takes advantage of local adaptation and customer proximity. In numerical examples for rolled aluminum and nylon resin plant networks in Europe, we find that the complementarity effects are large, as they are for nylon resins, if recycling is nascent and challenging economically and if the plant network is too centralized at first to benefit much from an increased recyclate ratio or increased localization. We find that, for the nylon resin network, considering an investment in the recyclate ratio as part of a coordinated investment plan drives the emergence of a decentralized and localized minimill network, even though an increased recyclate ratio does not link directly with either decentralization or localization. We conclude that material recycling, versatile miniplants, and localization can fit well together in a forward-looking, sustainable operations strategy.

We consider an infinite-horizon, periodic-review, single-item production/inventory system with random demand and backordering, where multiple setups are allowed in any period and a separate fixed cost is associated for each setup. Contrary to the majority of the literature on this topic, we do not restrict the order quantities to be integer multiples of the exogenously given batch size and instead allow the possibility of partial batches, in which case the fixed cost for ordering the batch is still fully charged. We build a model that particularly takes the batch-ordering cost structure into account. We introduce an alternative cost-accounting scheme to analyze the problem, which we use to develop a computationally efficient optimal solution method and several properties of the optimal solution. In addition, we propose two heuristic policies, both of which perform extremely well computationally.