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Now showing items 1 - 11 of 11

  • On metrics for supply chain resilience

    Behzadi, Golnar   O'Sullivan, Michael Justin   Olsen, Tava Lennon  

    Resilience, defined as the ability to recover quickly and effectively from a disruption, is critically important for supply chains. Yet, it has not been quantified as frequently as supply chain robustness. In this paper we review the existing metrics for supply chain resilience and introduce a new metric, titled the net present value of the loss of profit (NPV-LP). We test these metrics on a small supply chain problem consisting of one supply and one demand node for a perishable good over a multi-period horizon with a possible port shut-down. We use a stochastic programming formulation of the problem. We show how the different metrics cause different investment decisions for the supply chain, and hence why it is important to carefully pick the correct metric when modeling supply chain resilience. (C) 2020 Elsevier B.V. All rights reserved.
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  • Inventory rotation of medical supplies for emergency response

    Zhou, Quan Spring   Olsen, Tava Lennon  

    We investigate an inventory control system for a national medical reserve to rotate its long-life perishable product to a hospital. This work is motivated by the serious expiration problem existing in reserves prepared for emergency response. We explicitly consider the perishability of a long-life product, such as latex gloves, and study the joint rotation and ordering decisions. The optimal policy is characterised by two thresholds, and the whole shelf life horizon can be divided into two phases: non-rotation and then rotation after a critical period. We characterise the monotonicity of the order-up-to levels. We find that the optimal policy structure preserves well when extended to scenarios with a capacity constraint and multiple planning horizons. This system possesses an easy-to-implement optimal policy structure, and moreover, implies that we should not always ignore the perishability of long-life products. (C) 2016 Elsevier B.V. All rights reserved.
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  • Rotating the medical supplies for emergency response:A simulation based approach

    Zhou, Quan Spring   Olsen, Tava Lennon  

    Serious expiration problems exist in national medical reserves prepared for emergency response. One alternative to reduce expiration is to rotate the reserve to hospitals so products can be used for day to day operations. Yet, rotation incurs extra handling costs and needs to be combined with hospitals' ordering decisions. This decision process is complex and involves various sources of uncertainty. In this paper, we use discrete-event simulation to model the rotation of the reserve in combination with the hospitals' inventory management, and combine it with optimization to search for the optimal rotation policy. With simulation experiments, we evaluate the performance of rotation policies and analyze the impact of emergencies, multiple hospitals with fixed costs, perishability in hospitals, and lead time. Simulation results highlight the different impact of these factors on the rotation performance, and make suggestions to address these concerns. It is also observed that, while rotation could generate significant cost savings, it is not always optimal to totally eliminate expiration.
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  • On Markov Equilibria in Dynamic Inventory Competition

    Olsen, Tava Lennon   Parker, Rodney P.  

    We provide a review of the types of equilibria typically found in operations management inventory papers and a discussion on when the commonly used stationary infinite-horizon (open-loop) equilibrium may be sufficient for study. We focus particularly on order-up-to and basestock equilibria in the context of inventory duopolies. We give conditions under which the stationary infinite-horizon equilibrium is also a Markov perfect (closed-loop) equilibrium. These conditions are then applied to three specific duopolies. The first application is one with stockout-based substitution, where the firms face independent direct demand but some fraction of a firm's lost sales will switch to the other firm. The second application is one where shelf-space display stimulates primary demand and reduces demand for the other firm's product. The final application is one where the state variables represent goodwill rather than inventory. These specific problems have been previously studied in both the single period and/or stationary infinite-horizon (open-loop) settings but not in Markov perfect (closed-loop) settings. Under the Markov perfect setting, a variety of interesting dynamics may occur, including that there may be a so-called commitment value to inventory.
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  • On Hospice Operations Under Medicare Reimbursement Policies

    Ata, Baris   Killaly, Bradley L.   Olsen, Tava Lennon   Parker, Rodney P.  

    This paper analyzes the United States Medicare hospice reimbursement policy. The existing policy consists of a daily payment for each patient under care with a global cap of revenues accrued during the Medicare year, which increases with each newly admitted patient. We investigate the hospice's expected profit and provide reasons for a spate of recent provider bankruptcies related to the reimbursement policy; recommendations to alleviate these problems are given. We also analyze a hospice's incentives for patient management, finding several unintended consequences of the Medicare reimbursement policy. Specifically, a hospice may seek short-lived patients (such as cancer patients) over patients with longer expected lengths of stay. The effort with which hospices seek out, or recruit, such patients will vary during the year. Furthermore, the effort they apply to actively discharge a patient whose condition has stabilized may also depend on the time of year. These phenomena are unintended and undesirable but are a direct consequence of the Medicare reimbursement policy. We propose an alternative reimbursement policy to ameliorate these shortcomings.
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  • 2010 M&SOM Best Paper Award

    Olsen, Tava Lennon  

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  • Inventory Management Under Market Size Dynamics

    Olsen, Tava Lennon   Parker, Rodney P.  

    We investigate the situation where a customer experiencing an inventory stockout at a retailer potentially leaves the firm's market. In classical inventory theory, a unit stockout penalty cost has been used as a surrogate to mimic the economic effect of such a departure; in this study, we explicitly represent this aspect of consumer behavior, incorporating the diminishing effect of the consumers leaving the market upon the stochastic demand distribution in a time-dynamic context. The initial model considers a single firm. We allow for consumer forgiveness where customers may flow back to the committed purchasing market from a nonpurchasing "latent" market. The per-period decisions include a marketing mix to attract latent and new consumers to the committed market and the setting of inventory levels. We establish conditions under which the firm optimally operates a base-stock inventory policy. The subsequent two models consider a duopoly where the potential market for a firm is now the committed market of the other firm; each firm decides its own inventory level. In the first model, the only decisions are the stocking decisions and in the second model, a firm may also advertise to attract dissatisfied customers from its competitor's market. In both cases, we establish conditions for a base-stock equilibrium policy. We demonstrate comparative statics in all models.
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  • Congestion-based leadtime quotation and pricing for revenue maximization with heterogeneous customers

    Ata, Baris   Olsen, Tava Lennon  

    This paper studies a queuing model where two customer classes compete for a given resource and each customer is dynamically quoted a menu of price and leadtime pairs upon arrival. Customers select their preferred pairs from the menu and the server is obligated to meet the quoted leadtime. Customers have convex-concave delay costs. The firm does not have information on a given customer's type, so the offered menus must be incentive compatible. A menu quotation policy is given and proven to be asymptotically optimal under traditional large-capacity heavy-traffic scaling.
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  • Setting basestock levels in multi-product systems with setups and random yield RID A-7128-2010

    Grasman, Scott E.   Olsen, Tava Lennon   Birge, John R.  

    This paper provides procedures for setting optimal, or near-optimal, basestock levels in a multi-product system with setups and random yield. The procedures are derived using a novel polling system model of the system that contains both queues for production orders and queues for temporary storage of rework orders with routing occurring between these two types of queues. Both systems with backlogging and lost sales are analyzed using existing work on polling models with routing and possibly finite buffers. For a system with backlogging, we provide a cost function that is minimized by solving a set of single-item newsvendor problems. In systems with lost sales, each queue is given a finite buffer equal to the basestock level and excess demand is lost. We provide a cost function and show that finding optimal solutions for large problems is not tractable; thus, we provide a heuristic for finding the basestock levels and demonstrate the effectiveness of the heuristic and accuracy of the cost approximation through numerical tests.
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  • Near-Optimal Dynamic Lead-Time Quotation and Scheduling Under Convex-Concave Customer Delay Costs

    Ata, Baris   Olsen, Tava Lennon  

    We consider a make-to-order system where customers are dynamically quoted lead times (and prices). Customers are homogenous but have general (nonlinear) disutility for delay. Because the firm is a monopolist, the pricing problem is trivial and the dynamic problem reduces to one of lead-time quotation and order sequencing. We also consider the (static) problem of up-front capacity installation. We use a large-capacity asymptotic regime to make the problem tractable. We provide recommended policies for convex, concave, and convex-concave lead-time cost functions and prove that these policies are asymptotically optimal. The policies are both highly intuitive and readily implementable. Moreover, they provide delay guarantees for all served customers. They are tested numerically; we find that significant benefits can accrue by using the prescribed dynamic policies instead of first-come-first-served type policies.
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  • Polling systems with periodic server routeing in heavy traffic: distribution of the delay

    Olsen, Tava Lennon   van der Mei, R. D.  

    We consider polling systems with mixtures of exhaustive and gated service in which the server visits the queues periodically according to a general polling table. We derive exact expressions for the steady-state delay incurred at each of the queues under standard heavy-traffic scalings. The expressions require the solution of a set of only M - N linear equations, where M is the length of the polling table and N is the closed form for several routeing schemes commonly used in practice, such as the star and elevator visit order, in a general parameter setting. The results lead to simple and fast approximations for the distributions and the moments of delay in stable polling systems with periodic server routeing. Numerical results demonstrate that the approximations are highly accurate for medium and heavy loaded systems
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