Volume 4:3

Copies of these published papers may be downloaded from Informs Online

Title: "Coordination and Flexibility in Supply Contracts with Options"

Author(s): Ravi Anupindi

Abstract: We investigate the role of options (contingent claims) in a buyer-supplier system.  Specifically using a two-period model with correlated demand, we illustrate how options provide flexibility to a buyer to respond to market changes in the second period.  We also study the implications of such arrangements between a buyer and a supplier for coordination of the channel.  We show that, in general, channel coordination can be achieved only if we allow the exercise price to be piecewise linear.  Using linear prices channel coordination can be achieved under some sufficient conditions on the various cost and demand parameters.  We derive the appropriate prices for channel coordination which, however, violate the individual rationality constraint for the supplier.  We propose two types of all-unit quantity discount schemes (simple and bundled) that are individually rational and coordinate the channel.  Finally, we demonstrate (numerically) the benefits of options in improving channel performance and evaluate the magnitude of loss due to lack of coordination.

The Consulting Senior Editor was William Lovejoy.

The manuscript was submitted on May 19, 1999. The average review cycle time was 67 days.

Corresponding author: Ravi Anupindi, Stern School of Management, Tisch Hall, Suite 7-10, 40 West 4th Street, New York, NY 10012-1118 Phone: (212) 998-0487, E-mail: anupindi@stern.nyu.edu

Title: "Designing a Call Center with Impatient Customers"

Author(s): Marty Reiman

Abstract: The most common model to support workforce management of telephone call centers is the M/M/N/B model, in particular its special cases M/M/N (Erlang C, which models out busy-signals) and M/M/N/N (Erlang B, disallowing waiting).  All of these models lack a central prevalent feature, namely that impatient customers might decide to leave (abandon) before their service begins.

In this paper we analyze the simplest abandonment model, in which customers’ patience is exponentially distributed and the system’s waiting capacity in unlimited (M/M/N+M).  Such a model is both rich and analyzable enough to provide information that is practically important for call center managers.  We first outline a method for exact analysis of the M/M/N+M model, that while numerically tractable, is not very insightful.  We then proceed with an asymptotic analysis of the M/M/N+M model, in a regime that is appropriate for large call centers (many agents, high efficiency, high service level).  Guided by the asymptotic behavior, we derive approximations for performance measures and propose “rules of thumb” for the design of large call centers. We thus add support to the growing acknowledgment that insights from diffusion approximations are directly applicable to management practice.

The Consulting Senior Editor was Michael Harrsion.

The manuscript was submitted on October, 27, 1999. The average review cycle time was 77 days.

Corresponding author: Marty Reiman, Bell Laboratories, Lucent Technologies, Room 2C-315, 600 Mountain Avenue. Murray Hill, NJ 07974.  Phone:: (908)582-2368, E-mail: marty@research.bell-labs.com

Title: “The Supply Chain Impact of Smart Customers in a Promotion Environment”

Author(s): Ananth Iyer, Arnd Huchzermeier, Julia Freiheit

Abstract: Increasing product variety through the use of alternate package sizes is a commonly observed mechanism in the grocery industry.  Under such a scheme, however, the response to pricing decisions for each of the different package sizes is affected by how customers make demand choices.  We build a model in which customers react smart to retail promotions through stockpiling and package size switching.  We utilize data from the German grocery industry for an empirical fitting of the model.  We then develop a store-level inventory model for each SKU.  We show the benefit of capturing the smart customer response to price promotions by demonstrating its impact on the reduced inventory costs.  We use the model to generate a number of managerial implications of the model for the German grocery environment. 

(Retail Promotions; Price Transparency; Supply Chain Management; Grocery Industry)

The Consulting Senior Editor was Marshall Fisher and Ananth Raman

The manuscript was submitted on December 8, 1999. The average review cycle time was 72 days.

Corresponding author: Ananth Iyer, Purdue University, Krannert School of Management, 1310 Krannert Building, West Lafayette, IN 47907-1310.  Phone: 765-494-4514, Fax: 765-496-1778, E-mail: aiyer@mgmt.purdue.edu

Copies of these published papers may be downloaded from Informs Online