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Kremer M.,Pennsylvania State University | Minner S.,TU Munich | Van Wassenhove L.N.,Technology and Operations Management
Production and Operations Management | Year: 2014

The value of demand information underlies many supply chain strategies that aim at better matching supply and demand. This study reports on the results of a laboratory experiment designed to estimate the behavioral value of demand information. Relative to the commonly assumed benchmark of a rational risk-neutral decision maker, we find that decision makers are consistently willing to pay too much for the option to eliminate the risk of supply not matching demand. Contrary to intuition, we show that risk aversion does not explain this result. We posit that demand information provides behavioral value because it mitigates regret from ex post inventory errors. © 2013 Production and Operations Management Society. Source

Kremer M.,Pennsylvania State University | Van Wassenhove L.N.,Technology and Operations Management
Production and Operations Management | Year: 2014

In order to reduce their inventory risk, firms can attempt to contract with their suppliers for shorter supply lead-times, with their buyers for longer demand lead-times, or both. We designed a controlled laboratory experiment to study contracts that shift a focal firm's inventory risk to its supply chain partners and address two questions. First, is it more effective if the cost of shifting inventory risk is framed as a fixed fee or in per-unit cost terms? We find that, generally, our participants are willing to pay more to avoid supply-demand mismatches than the expected costs from such mismatches. This tendency to overpay is mitigated under fixed fee schemes. Second, does it matter whether the option to reduce inventory risk is the outcome of either increased responsiveness from the upstream supplier or advanced demand information from the downstream buyer? Our results suggest that this difference, when only a matter of framing, has no significant effect on willingness-to-pay. © 2013 Production and Operations Management Society. Source

Van Wassenhove L.N.,Technology and Operations Management | Zikopoulos C.,Aristotle University of Thessaloniki
International Journal of Production Research | Year: 2010

We study a simple reverse supply chain consisting of a remanufacturing facility and a number of independent locations where used products are returned by the end-users. At the collection locations, the returned products are graded and classified based on a list of nominal quality metrics provided by the remanufacturer. It is assumed that this classification is subject to errors; specifically, the returns condition is overestimated because of a stochastic proportion of returned units which are classified in classes corresponding to better quality than the actual. The scope of the paper is to study how these classification errors affect the optimal procurement decisions of the remanufacturer as well as the associated profit for the cases of both constant and stochastic demand in a single-period context. Moreover, in the former case we study the impact of these classification errors on profit variability. The quantification of the impact of quality overestimation provides intuition on the value of reliable classification and on the extent of the necessary investments and initiatives to improve classification accuracy. © 2010 Taylor & Francis. Source

Van Wassenhove L.N.,INSEAD | Pedraza Martinez A.J.,Technology and Operations Management
International Transactions in Operational Research | Year: 2012

The demand for humanitarian aid is extraordinarily large and it is increasing. In contrast, the funding for humanitarian operations does not seem to be increasing at the same rate. Humanitarian logistics has the challenge of allocating scarce resources to complex operations in an efficient way. After acquiring sufficient contextual knowledge, academics can use operations research (OR) to adapt successful supply chain management best practices to humanitarian logistics. We present two cases of OR applications to field vehicle fleet management in humanitarian operations. Our research shows that by using OR to adapt supply chain best practices to humanitarian logistics, significant improvements can be achieved. © 2010 The Authors. International Transactions in Operational Research. © 2010 International Federation of Operational Research Societies. Source

Sosa M.E.,Technology and Operations Management
Production and Operations Management | Year: 2014

Design rework is a core phenomenon in new product development (NPD). Yet carrying out design rework presupposes recognizing the need for it. I characterize the types of interpersonal knowledge transfer that help developers realize the need for design rework in NPD. As predicted by the NPD literature, I find that individuals who interact frequently with colleagues to address their task interdependences are more likely to realize the need for rework. I also learn that interacting with colleagues who have different expertise in process-related knowledge (as opposed to product-related knowledge) facilitates realizing the need for rework. However, to develop a deeper understanding of how individuals recognize the need for rework when interacting with others, we must expand our views beyond task interdependence and expertise-related factors. In particular, organizational variables - both formal and informal - play a significant role. With respect to formal hierarchical structures, actors of superior rank are less likely to realize the need for rework regardless of whether or not their interacting partner is of superior rank; however, actors of superior rank are more likely to trigger realizing the need for rework when interacting with partners of subordinate rank. By examining an organization's informal structure, I discover that the social "embeddedness" of developers (i.e., the energy and attention invested in a dyadic relationship) significantly influences their propensity to realize the need for rework. Several hypotheses are tested in a sociometric study conducted within the development department of a software company, and I discuss the implications for behavioral operations in NPD. © 2013 Production and Operations Management Society. Source

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