Interfaces current issue

Introduction: 2009 Franz Edelman Award for Achievement in Operations Research and the Management Sciences

Bollapragada, S., Sodhi, M. S. — Tue, 02 Feb 2010 10:16:41 PST

This special issue of Interfaces is devoted to the finalists of the 38th annual competition for the Franz Edelman Award for Achievement in Operations Research and the Management Sciences, the profession's prestigious award for the practice of operations research. Of the six papers in this issue, one demonstrates the benefits from OR/MS-based scheduling of empty railcars based on customer orders at CSX. The second, the winner of the Edelman Award, shows how HP manages a product portfolio in the dynamic electronics industry. The third describes how IBM uses OR models to improve sales force productivity. The fourth reflects the development and deployment of OR-based revenue management for group pricing at Marriott. The fifth discusses the use of OR models for tactical and strategic decisions around supply chain planning and capacity at Norske Skog, including such difficult decisions as closing plants. The sixth entry shows how Zara deploys inventory from two central warehouses to stores worldwide using OR.

CSX Railway Uses OR to Cash In on Optimized Equipment Distribution

Gorman, M. F., Acharya, D., Sellers, D. — Tue, 02 Feb 2010 10:16:41 PST

Each day, CSX Railway allocates hundreds of empty railcars among hundreds of customer car orders. In 1997, it implemented the US rail industry's first real-time, fully integrated equipment-distribution optimization system, the dynamic car-planning system (DCP). DCP seamlessly integrates operations research modeling into CSX's process that assigns empty cars to customer car orders. CSX estimates that the DCP system saves the company more than $51 million annually and has saved $561 million since its implementation. DCP has also provided $1.4 billion in capital-expenditure avoidance because of more efficient car allocation. Fewer railcars yield improved return on assets and reduced congestion on the CSX rail network. Customer satisfaction has also increased because of improved empty-car delivery. Public benefits include improved highway safety; reductions in congestion, pollution, and greenhouse gases; and reduced tax-supported road maintenance, thus saving an estimated $600 million.

HP Transforms Product Portfolio Management with Operations Research

Tue, 02 Feb 2010 10:16:41 PST

Hewlett-Packard (HP) offers many innovative products to meet diverse customer needs. The breadth of its product offering has helped the company achieve unparalleled market reach; however, it has come with significant costs and challenges. By offering multiple similar products, a manufacturer increases its overall demand volatility, reduces forecast accuracy, and can adversely affect revenue and costs across the entire product life cycle. At HP, these impacts included increases in inventory-driven costs and order-cycle time; liabilities to channel partners; and costs of operations, research and development, marketing, and administration. Furthermore, complexity in HP's product lines confused customers, sales representatives, and channel partners, sometimes driving business to competitors. HP developed two powerful operations research-based solutions for managing product variety. The first, a framework for screening new products, uses custom-built return-on-investment (ROI) calculators to evaluate each proposed new product before introduction; those that do not meet a threshold ROI level are targeted for exclusion from the proposed lineup. The second, HP's Revenue Coverage Optimization (RCO) tool, which is based on a fast, new maximum-flow algorithm, is used to manage product variety after introduction. By identifying a core portfolio of products that are important to order coverage, RCO enables HP businesses to increase operational focus on their most critical products. These tools have enabled HP to increase its profits across business units by more than $500 million since 2005. Moreover, HP has streamlined its product offerings, improved execution, achieved faster delivery, lowered overhead, and increased customer satisfaction and market share.

Operations Research Improves Sales Force Productivity at IBM

Tue, 02 Feb 2010 10:16:41 PST

In 2004, IBM introduced a set of broad operations research-based initiatives designed to improve the efficiency and productivity of its global sales force. The first solution, OnTARGET, provides a set of analytical models designed to identify new sales opportunities at existing IBM accounts and at noncustomer companies. The second solution, the Market Alignment Program (MAP), optimally allocates sales resources based on field-validated analytical estimates of future revenue opportunities in operational market segments. IBM Research developed the operations research models and initial internal websites for both solutions. The IBM Software Group initially implemented OnTARGET, which was subsequently made available to over 13,000 sales representatives across IBM sales organizations worldwide. The IBM Sales and Distribution organization deployed MAP as an integral part of its sales model to better align sales resources with the best market opportunities. We describe the development of both analytical models, and the underlying data models and websites used to deliver the solutions. We conclude with a discussion of the business impact, which we estimate as hundreds of millions of dollars annually for the combined initiatives.

Marriott International Increases Revenue by Implementing a Group Pricing Optimizer

Hormby, S., Morrison, J., Dave, P., Meyers, M., Tenca, T. — Tue, 02 Feb 2010 10:16:41 PST

Marriott International's Group Pricing Optimizer (GPO), a decision support system, provides guidance to Marriott personnel on pricing hotel rooms for group customers. GPO uses demand segmentation, price-elasticity modeling, and optimization techniques to recommend an optimal rate. In operation since late 2006, the system has improved Marriott's hotel profitability and enhanced the sales process for both sales managers and customers.

Norske Skog Improves Global Profitability Using Operations Research

Everett, G., Philpott, A., Vatn, K., Gjessing, R. — Tue, 02 Feb 2010 10:16:41 PST

Many businesses are currently uncertain of how the economic recession will affect demand for their services and products. For global papermaker Norske Skog, this is a familiar situation. Over the past decade, the company has experienced declining demand for its products as electronic media have replaced newsprint publications. As it struggles to survive, the company has been forced to make some difficult decisions, including closing paper production lines and entire mills. Operations research (OR) models have become a vital part of Norske Skog's decision-making process, helping the company to significantly reduce costs and enabling senior managers to make difficult choices with confidence that their solutions are the best possible. The tactical use of OR models has provided solutions that enable Norske Skog to save US$8 million and US$10 million annually in Australasia and Europe, respectively. In 2008, the Norske Skog Board used a model to make a strategic decision to close two paper mills and a paper machine, saving the company US$100 million annually, compared with the status quo. These savings are equivalent to 3 percent of the company's revenue.

Zara Uses Operations Research to Reengineer Its Global Distribution Process

Tue, 02 Feb 2010 10:16:41 PST

Overcoming significant technical and human difficulties, Zara recently deployed a new process that relies extensively on sophisticated operations research models to determine each inventory shipment it sends from its two central warehouses to its 1,500 stores worldwide. By taking a retail size-assortment view of a store's inventory, the model incorporates the link between stock levels and demand to select store replenishment quantities. Through a rigorous, controlled field experiment, we estimate that this new process has increased sales by 3–4 percent; this corresponds to estimated profits of approximately $233 million and $353 million in additional revenues for 2007 and 2008, respectively.

Book Reviews

Lev, B. — Tue, 02 Feb 2010 10:16:41 PST

In Book Reviews, we review an extensive and diverse range of books. They cover theory and applications in operations research, statistics, management science, econometrics, mathematics, computers, and information systems. In addition, we include books in other fields that emphasize technical applications. However, we do not review software. To submit a book for review, please send it to me at the above address. Although we cannot review all books because of space limitations, we do list all books that we receive. We commission all book reviews and do not accept unsolicited reviews. To become a reviewer, please send me your name, address, and specific areas of expertise. We encourage readers to suggest books for review or to ask publishers to send copies of such books.

The authors or editors of books we review in this issue are Enrique Alba, Bernabé Dorronsoro, Massimiliano Caramia, Paolo Dell'Olmo, Gerald J. Hahn, and Necip Doganaksoy.

Contributors

Tue, 02 Feb 2010 10:16:41 PST

No abstract available.

Interfaces Instructions to Authors

Tue, 02 Feb 2010 10:16:41 PST

No abstract available.

INFORMS MEETING CALENDAR

Tue, 02 Feb 2010 10:16:42 PST

No abstract available.

Call for Papers--Interfaces Special Issue: Analytics in Sports

Fry, M. J., Ohlmann, J. W. — Tue, 02 Feb 2010 10:16:42 PST