|September 20||9:30 AM||3325 Graigner Hall||Chris Ryan||Booth School, University of Chicago|
|October 29||9:30 AM||3560 Grainger Hall||Kostas Nikolopoulos||Bangor University|
Looking for the Needle in the Haystack:
|OIM Research Workshop|
|December 6||1:00 PM||4580 Grainger Hall||Jan Van Mieghem||Kellogg School, Northwestern University||Dual Sourcing and Smoothing Under Non-Stationary Demand Time Series: Re-shoring with SpeedFactories|
|December 6||2:30 PM||4580 Grainger Hall||Ryan Buell||Harvard Business School, Harvard University||Surfacing the Submerged State: Operational Transparency Increases Trust in and Engagement with Government|
|December 7||9:00 AM||4580 Grainger Hall||Atalay Atasu||Scheller College of Business, Georgia Tech|
|February 8||9:30 AM||3070 Grainger Hall||Tinglong Dai||Carey Business School, Johns Hopkins University||Too Much? Too Little? Economic Modeling of Physician Testing Decisions|
|April 5||9:30 AM||3070 Grainger Hall||Kumar Rajaram||Anderson School, UCLA|
For more information please contact Prof. Bob Batt, firstname.lastname@example.org.
Incentive Design for Operations-Marketing Multitasking
Prof. Chris Ryan, Associate Professor, Booth School of Business, University of Chicago
A firm hires an agent (e.g., store manager) to undertake both operational and marketing activities for a product. Marketing activities boost demand, but for demand to translate into sales, the agent must exert operational effort to ensure adequate inventory on hand. When demand exceeds available inventory, neither the firm nor the agent can observe unmet demand, a phenomenon known as demand censoring. The firm designs a compensation plan to induce the agent to put appropriate effort into both marketing and operations. We formulate this incentive design problem using moral hazard principal-agent framework with a multitasking agent subject to demand censoring. We develop a novel bang-bang control approach, with a general optimality structure applicable to a broad class of incentive design problems. Using this approach, we characterize the optimal compensation plan as consisting of a base salary and a bonus paid to the agent under one of the following two conditions: (a) all inventory above a predetermined threshold is sold, and (b) the sales quantity meets a downward-sloping inventory-dependent target. This structure implies non-monotonicity in the compensation plan: given the same sales outcome, the agent can be less likely to receive the bonus under a better inventory outcome. Furthermore, we find that inventory and demand outcomes can act as either complements or substitutes of each other in the compensation plan. Finally, we rule out the optimality of rudimentary compensation plans that generalize the logic of binary payment schemes from the single-tasking literature, revealing additional subtleties in the multi-tasking setting.
This is joint work with Tinglong Dai (Johns Hopkins University) and Rongzhu Ke (Hong Kong Baptist University).
Looking for the Needle in the Haystack: Evidence of the Superforecasting Hypothesis When Time and Samples are Limited
Prof. Kostas Nikolopoulos, Professor, Bangor Business School, Bangor University
The success of the Good Judgmental Project in harnessing the power of superforecasting naturally leads to the question as to how one can implement that approach on a smaller scale with more limited resources as in less time and fewer participants. Small(er) corporate environments and SME-type decision structures are prime examples where the modified superforecasting approach can be used. In this research we focus on a hybrid approach of judgmental forecasting on special events where we combine training of superforecasters-to-be via the concept of a modified version of structured analogies (s-SA), a staple of judgmental forecasting in the literature. We call the resulting approach structured superforecasting and illustrate its efficacy over samples of participants from the wider public sector and the academic community. In particular, with a proper experimental design that includes a training and a control group, we apply the above methodology and compare performances. More importantly we do find evidence of the superforecasting hypothesis even when we are working with smaller samples – a few hundred experts - and when the selection of super forecasters needs to be done much faster – in less than a year
Leasing, Modularity, and the Circular Economy
Prof. Atalay Atasu, Professor, Scheller College of Business, Georgia Tech
The circular economy (CE) movement has been gaining momentum as a promising solution to the environmental problems we are facing today. Promoted by non-profits such as the Ellen MacArthur Foundation and supported by major consulting companies (e.g., by McKinsey and Accenture), the CE is widely discussed in academic, industry and policy-making circles. A case in point is the recent CE pledge form multinationals (such as HP, Dell, Philips and Cisco) in the last World Economic Forum event in Davos.
The CE hinges on the idea that smart product and business model designs that close material and energy loops will help achieve not only environmental sustainability but also better economic outcomes. We test this influential premise in the context of modular product architectures and leasing, two prominent and frequently discussed elements of a circular economy implementation. The proponents of CE view these two strategies as complementary, reinforcing each other's beneficial effects especially on firm profits and the environment. A well-known case in point is Xerox, who has long leased products with modular product architectures as part of a successful business model, and claimed significant environmental benefits from its implementation. However, the joint execution of leasing and selling is not as prevalent in other industries or firms. Our interactions with a multinational asset-management company further suggest that many firms need guidance as to when and to what extent leasing modular products can be a profitable business strategy and beneficial for the environment.
To this end, observing that most product categories that fit into this discussion are durables, we formulate an analytical model that builds on the durable goods literature and extends it to analyze the impact of a modular product architecture under leasing. We find that leasing and modular product architectures are typically substitutes from a firm profit point of view. Leasing modular products is profitable only when (i) off-lease products are in much better condition than used products that have been sold; (ii) replacing product modules to offer blended products with used and new modules is economical for the firm; and (iii) product modules substantially differ with respect to their durability. We demonstrate the practicality of these results by a number of examples based on our interactions with the asset-management company. Regarding the environmental implications of leasing modular products, we find that they benefit the environment only in a relatively limited set of conditions, which are neither immediate nor intuitive.
The main take-away from this paper is that for all the talk on the potential of the circular economy, there is a lot to be done to test and verify its broad, sweeping claims, and much of this needs an academic perspective.
Surfacing the Submerged State: Operational Transparency Increases Trust in and Engagement with Government
Prof. Ryan Buell, Associate Professor, Harvard Business School, Harvard University
As trust in government reaches historic lows, frustration with government performance approaches record highs. We propose that peoples’ perceptions of government and their levels of engagement with it can be reshaped and enhanced by increasing government’s operational transparency – that is, by designing service interactions so that citizens can see the often-hidden work that government performs. Across three studies, we find that revealing the “submerged state” through operational transparency impacts citizens’ attitudes and behavior. In Study 1, viewing a five-minute computer simulation highlighting the work performed by the government of an archetypal town increased trust in government and support for government services. In Study 2, residents of Boston, Massachusetts who interacted with a website that visualized service requests (e.g., potholes and broken street lamps), and efforts by the city’s government to address them became 14% more trusting and 12% more supportive of government. Moreover, residents who additionally received transparency into the growing backlog of service requests that government was failing to fulfill were no less trusting and supportive of government than residents who received no transparency at all. Study 3 leveraged proprietary data from a mobile phone application developed by the city of Boston through which residents can submit service requests; the city’s goal was to increase engagement with the app. Users who received photos of government meeting their service requests submitted 60% more requests and in 40% more categories over the ensuing 13 months than users who did not receive such photos. These significant gains in engagement persisted for 11 months following users’ initial exposure to operational transparency, and were highest for users who previously had experienced government to be moderately effective in responding to their service requests. Taken together, our results suggest that revealing the submerged state through operational transparency can shape both attitudes and behavior – results with potential implications for a broad array of service domains where operations are hidden and levels of consumer trust and engagement are faltering.
Dual Sourcing and Smoothing under Non-Stationary Demand Time Series: Re-shoring with SpeedFactories
Prof. Jan Van Mieghem, Professor, Kellogg School of Management, Northwestern University
We investigate the emerging trend of near-shoring a small part of the global production back to local SpeedFactories. The short lead time of the responsive SpeedFactory reduces the risk of making large volumes in advance, yet it does not involve a complete re-shoring of demand. Using a breakeven analysis we investigate the lead time, demand, and cost characteristics that make dual sourcing with a SpeedFactory desirable compared to off-shoring to a single supplier. We propose order rules that extend the celebrated inventory optimal order-up-to replenishment policy to settings where capacity costs exist and demonstrate their excellent performance. We highlight the significant impact of autocorrelated and non-stationary demand series, which are prevalent in practice yet challenging to analyze, on the economic benefit of re-shoring. Methodologically, we adopt Z−transforms and present an exact analysis of several discrete-time linear inventory models.
Prof. Tinglong Dai, Associate Professor, Carey Business School, Johns Hopkins University
Few issues in the healthcare ecosystem are more salient than the utilization of medical tests. By some estimates, up to 30% of medical-testing decisions are deemed inappropriate, which may entail either over- or under-testing. All too frequently, the public attention has centered on over-testing. By comparison, under-testing has received little media coverage, but frequently appears in the medical literature. In addition, contrary to popular belief, the US trails most OECD countries in terms of the utilization of medical tests.
In this talk, I discuss several recent modeling efforts aimed at understanding physician decision-making leading to over- and under-testing. These efforts, motivated by ophthalmology and interventional cardiology practices, reflect clinical, financial, and operational incentives. I will also highlight implications for policymakers and healthcare executives.
My talk will draw from three papers:
Tinglong Dai, Shubhranshu Singh. 2018. Conspicuous by Its Absence: Diagnostic Expert Testing under Uncertainty. Johns Hopkins University Working Paper.
Tinglong Dai, Mustafa Akan, Sridhar Tayur. 2017. Imaging Room and Beyond: The Underlying Economics behind Physicians’ Test-Ordering Behavior in Outpatient Services. Manufacturing & Service Operations Management 19(1) 99–113.
Tinglong Dai, Xiaofang Wang, Chao-Wei Hwang. 2018. Clinical Ambiguity and Conflicts of Interests in Interventional Cardiology Decision-Making. Johns Hopkins University Working Paper.
Integrated Anesthesiologist and Room Scheduling for Surgeries: Methodology and Application
Prof. Kumar Rajaram, Professor, Anderson School of Management, UCLA
We consider the problem of minimizing daily expected resource usage and overtime costs across multiple parallel resources such as anesthesiologists and operating rooms, which are used to conduct a variety of surgical procedures at large multispecialty hospitals. To address this problem, we develop a two-stage, mixed-integer stochastic dynamic programming model with recourse. The first stage allocates these resources across multiple surgeries with uncertain durations and prescribes the sequence of surgeries to these resources. The second stage determines actual start times to surgeries based on realized durations of preceding surgeries and assigns overtime to resources to ensure all surgeries are completed using the allocation and sequence determined in the first stage. We develop a data-driven robust optimization method that solves large-scale real-sized versions of this model close to optimality. We validate and implement this model as a decision support system at the UCLA Ronald Reagan Medical Center. This system effectively incorporates the flexibility in the resources and uncertainty in surgical durations, and explicitly trades off resource usage and overtime costs. This has increased the average daily utilization of the anesthesiologists by 3.5% and of the operating rooms by 3.8%. This has led to an average daily cost savings of around 7% or estimated to be $2.2 million on an annual basis. In addition, the insights based on this model have significantly influenced decision making at the operating services department at this hospital.