Coping with Gray Markets: The Impact of Market Conditions and Product Characteristics. F. Iravani, H. Mamani, R. Ahmadi. October 2011.
Gray markets, also known as parallel imports, are marketplaces for trading genuine products that are diverted from authorized distribution channels. They have created fierce competition for manufacturers in many industries and each year billions of dollars worth of products are traded in these markets. Using a game-theoretic model, we analyze the impact of parallel importation on a price-setting manufacturer that serves two markets with uncertain demand. We characterize the optimal joint price and quantity decisions of the manufacturer which determine whether the manufacturer should ignore, block, or allow parallel importation. We also show that parallel importation forces the manufacturer to reduce her price gap while demand uncertainty forces her to lower prices in both markets. Moreover, we observe that parallel importation may force the manufacturer to exit the low-profit market. Through extensive numerical experiments, we explore the impact of market conditions (size and price elasticity) and product characteristics (a fashion item or a commodity) on the manufacturer's reaction to parallel importation. In addition, we provide interesting insights about the value of strategic pricing for coping with gray markets versus the uniform pricing policy that has been adopted by some companies to eliminate gray markets.
The Traveling Salesman Problem with Flexible Coloring. T.A. Roemer, R. Ahmadi, S. Dasu. Discrete Applied Mathematics. 160(12): 1798-1814. August 2012.
This paper introduces a new generalized version of the Traveling Salesman Problem (TSP) in which nodes belong to various color classes and each color class must be visited as an entity. We distinguish the cases of the problem for which the colors are either pre-assigned or can be selected from a given subset of colors. We establish computational complexity and provide concise formulations for the problems that lend themselves to derive tight lower bounds. Exact solutions for special cases and a two-phase heuristic for the general case are provided. Worst case performance and asymptotic performance of the heuristic are analyzed and the effectiveness of the proposed heuristic in solving large industrial size problems is empirically demonstrated.
A Hierarchical Framework for Organizing a Software Development Process. F. Iravani, S. Dasu, R. Ahmadi. Operations Research. Fortcoming.
Every year, companies that produce commercial tax preparation software struggle with thousands of state and federal changes to tax laws and forms. Three competitors dominate the market with its short selling season, and release delays slash profits. Tax authorities issue updates August-December, and all changes must be processed and incorporated before year end. Systematic resource allocation and process management are crucial yet problematic due to the volume and complexity of changes, brief production timeframe, and feedback loops for bug resolution. A leading tax software provider asked us to formulate systematic approaches for managing process flow and staffing development stages with the goal of releasing the new version on time at minimum cost. To that end, we develop deterministic models that partition tax forms into development groups and determine staffing levels for each group. Partitioning forms into groups simplifies work flow management and staffing decisions. To provide a range of resource configurations, we develop two modeling approaches. Numerical experiments show that our models capture the salient features of the process and that our heuristics perform well. Implementing our models reduced company overtime hours by 31% and total resource costs by 13%.
Gray Markets, A Product of Demand Uncertainty and Excess Inventory. S. Dasu, R. Ahmadi, S.M. Carr. Production and Operations Management. Forthcoming.
Diverting large quantities of goods from authorized distribution channels to unauthorized or "gray market" channels, albeit legal, significantly affects both firms and consumers due to effects on price, revenue, service and warranty availability, and product availability. In this paper we consider mechanisms by which the uncertainty surrounding inventory ordering decisions drives gray markets. We start with a minimal stochastic supply chain model composed of a producer and a retailer; then we restructure the model to add a distributor whereby the distributor and authorized retailer have the option of diverting inventory to a gray market. Our analysis sheds light on three issues: impacts of diversion on the various supply chain participants, strategies producers could use to combat or exploit gray markets, and important considerations for authorized retailers trying to set optimal order quantities in the presence of a gray market. Our analysis yields new insights into the behavior and impact of gray markets, which can inform management strategies and policies for confronting them.
Coordinated Scheduling of Customer Orders for Quick Response. R. Ahmadi, U. Bagchi, T.A. Roemer. Naval Research Logistics. 52(6): 493-512. September 2005.
The scheduling problem addressed in this paper concerns a manufacturer who produces a variety of product types and operates in a make-to-order environment. Each customer order consists of known quantities of the different product types, and must be delivered as a single shipment. Periodically the manufacturer schedules the accumulated and unscheduled customer orders. Instances of this problem occur across industries in manufacturing as well as in service environments. In this paper we show that the problem of minimizing the weighted sum of customer order delivery times is unary NP-hard. We characterize the optimal schedule, solve several special cases of the problem, derive tight lower bounds, and propose several heuristic solutions. We report the results of a set of computational experiments to evaluate the lower bounding procedures and the heuristics, and to determine optimal solutions.Coordinated Scheduling of Customer Orders. R.H. Ahmadi, U. Bagchi. December 2001.
The scheduling problem addressed in this paper concerns a manufacturer who produces a variety of product types and operates in a make-to-order environment. Each customer order consists of known quantities of the different product types, and must be delivered as a whole shipment. Periodically the manufacturer schedules the accumulated and unscheduled customer orders. Instances of this problem occur in the optical industry, pharmaceutical industry, computer manufacturing, furniture manufacturing, circuit board manufacturing, and electronic auto parts production. In this paper we show that the problem of minimizing the weighted sum of customer order delivery times is unary NP-hard. We characterize the optimal schedule, solve several special cases of the problem, derive tight lower bounds and propose several heuristic solutions. We report the results of a set of computational experiments to evaluate the lower bounding procedures and the heuristics, and to determine optimal solutions.
Concurrent Crashing and Overlapping in Product Development. R.H. Ahmadi, T.A. Roemer. Operations Research. 52(4): 606-622. July-August 2004.
This research addresses two common tools for reducing product development lead times: overlapping of development stages and crashing of development times. For the first time in the product development literature, a formal model addresses both tools concurrently, thus facilitating analysis of the interdependencies between overlapping and crashing. The results exhibit the necessity of addressing overlapping and crashing concurrently, and exhibit general characteristics of optimal overlapping/crashing policies. The impact of different evolution/sensitivity constellations on optimal policies is investigated, and comprehensive guidelines for structuring development processes are provided. For the special case of linear costs, an efficient procedure is presented that generates the efficient time-cost trade-off curves and determines the corresponding optimal overlapping/crashing policies. The impact of key parameters and the robustness regarding their estimates is illustrated with a simple two-stage example.
Models for Concurrent Product and Process Design. R. Ahmadi, T.A. Roemer. European Journal of Operational Research. 203(3): 601-613. June 2010.
We propose procedures to address product design and manufacturing process configurations concurrently in environments characterized by large degrees of product proliferation. Exploiting the intrinsic flexibility of product and process design, we present two approaches that synchronize production flows through the manufacturing system. These approaches integrate product and manufacturing system design decisions with operational concerns and provide powerful means for managing production in environments characterized by a proliferation of products. Experimental results show that the proposed methods can substantially reduce manufacturing lead times, work in process (WIP), and overall system complexity.
Cost, Quality, and Access in the Health Care System. R.H. Ahmadi, R. Asthana. 1999.
The American health care system is beset by significant problems. Chief among these are the continuing rapid growth in costs, and denial of access to a large portion of the population. Amidst the problems, however, remains the fact that the U.S. system offers a very high quality of care to those with access. To address the problems in the health care system, yet preserve quality standard, a considerable number of reform proposals have been advanced. The problem of providing universal access without decreasing quality or increasing cost, however, remains challenging.
In this paper, we demonstrate a methodology that, for a single disease of specific characteristics and within modeling assumptions, shows that it is possible to achieve universal access and increase service quality without increasing cost. The central tenet of the methodology is to relate quantitatively the three dimensions of cost, quality, and access. Understanding the quantitative relationships among cost, quality, and access allows for the testing of policies by measuring the impact (positive or negative) of a change in one dimension on the other two dimensions. The methodology is developed as follows: We define two measures of quality. First, 'national health quality,' or NHQ, that defines the quality of health of the population and, second, service quality, or SQ, at medical treatment facilities. We use queueing systems in steady state to model the relationships between each measure of quality with cost and access.
The relationships among cost, quality, and access serve as the foundation for single disease managerial and policy analysis. In particular, we demonstrate that there are several policies that achieve, at constant cost, universal access and increase in quality. The relationships developed in the paper allow for the selection of the supremum policy.
Resource Allocation in Managed Care Systems: A Single Disease Development. R.H. Ahmadi, R. Asthana. May 1997.
Health care delivery in the United States is undergoing a paradigm shift from fee-for service to managed care. The defining characteristic of managed care is the capitated budget; consequently, the provision of health care will increasingly be subject to budget constraints. In this paper we consider the formulation of managerial policy, for single chronic disease, under constrained budgets. The policy we formulate has two objectives. The first objective is the maximization of the health of the population. The second objective is to quantify the effect of increased access on the health care system in terms of the health of the population.
For the policy objective defined in the paper, our purpose is to optimally allocate available resources such that the constituent measures of the policy are maximized. The method is to formulate a one disease product from multi-class queueing network model of the health care system. The model, along with defined measures for population health forming the objective functions, enables the development of optimization models to allocate resources. The results of this paper demonstrate the necessary resource allocations, explore the dynamics of capitated health care systems as a function of access, and provide managerial implications.
Flow Management to Optimize Retail Profits at Theme Parks. K. Rajaram, R. Ahmadi. Operations Research. 51(2): 175-184. March-April 2003.
In many theme parks, stores are located within major attractions to sell related merchandise. Sales at such stores form a significant portion of theme park profits. Typically, store sales depend upon visitor flows through the attraction, customer satisfaction with the attraction, and the merchandise at the store. In addition, such stores constitute a unique retail environment, as visitor .ows to attractions can be managed and stores are not competitors, but belong to the same parent company. This provides the opportunity to increase store sales by interfacing park operations, which manages visitor flows by setting schedules and capacity of attractions, with the store-level merchandising process, which determines which and how much product to order. Motivated by a study at Universal Studios Hollywood (USH), we develop a flow management model to link park operations with store-level merchandising. This model sets the capacities and schedules of the major attractions to increase visitor flows to high-profit retail areas subject to visitor satisfaction, capacity, scheduling, and flow-balance constraints. In addition, this model serves as an important tool to generate and evaluate various strategies aimed at increasing theme park pro.tability at USH.
Structuring Product Development Processes. R.H. Ahmadi, T.A. Roemer, R. Wang. European Journal of Operational Research. 130(3): 539-558. 2001.
This paper proposes operational frameworks for structuring product development processes. The primary objective of this research is to develop procedures to minimize iterations during the development process that adversely affect development time and costs. Several procedures are introduced to restructure the development process. The computation of the corresponding product development times is facilitated by two Markov models addressing different types of learning. The methodologies are employed to identify a set of managerial concerns in restructuring the product development processes. The developed framework has become an integral part of a re-engineering project for the development of rocket engines at Rocketdyne Division of Rockwell International. Throughout the paper, the methodologies are illustrated with the help of this process.
Time-Cost Trade-Offs in Overlapped Product Development. T.A. Roemer, R.H. Ahmadi, R. Wang. Operations Research. 48(6): 858-865. November-December 2000.
Increasingly shorter product life cycles impel firms to design, develop, and market more products in less time than ever before. Overlapping of design and development stages is commonly regarded as the most promising strategy to reduce product development times. However, overlapping typically requires additional resources and can be costly. This research addresses the trade-off between product development time and costs and introduces an algorithm to determine an appropriate overlapping strategy under different scenarios. The methodology developed was successfully employed at Rocketdyne Division of Rockwell International.
Parallel Imports: Challenges from Unauthorized Distribution Channels. R.H. Ahmadi, B.R. Yang. Marketing Science. 19(3): 279-294. Summer 2000.
The problem of parallel imports: unauthorized flows of products across countries, which compete with authorized distribution channels, is examined. Parallel imports may help the manufacturer to extend the global reach of its product and even boost its global profit. If the manufacturer offers a discount version through its authorized dealers, it is running a high risk of confusing customers and tarnishing brand images. Parallel imports may cause similar concerns for the manufacturer, but unauthorized dealers are perceived as further removed from the manufacturer. Therefore, there is less risk of confusing customers when parallel imports are channeled through unauthorized dealers. Furthermore, they are more nimble in diverting the product whenever their transshipment and marketing costs are small enough not to offset the authorized price gap and the valuation discount.
A Mini-Line Approach for Pull Production. R.H. Ahmadi, H. Matsuo. European Journal of Operational Research. 125(2): 340-358. 2000.
In high volume manufacturing, the just-in-time system using pull production is often successfully applied to achieve good performance in cost, time, and quality. However, its recent application to printed circuit board manufacturing is hampered by 3 conditions: product variety proliferation, short product life cycle, and significant machine setup time. The mini-line approach proposed in this paper is designed to implement pull production in such manufacturing environments without losing its benefits. MLA is hierarchical in addressing the production planning and control problem, consisting of multiple layers of optimization problems.
Routing Heuristics for Automated Pick and Place Machines. R.H. Ahmadi, J.W. Mamer. European Journal of Operational Research. 117(3): 533-552. September 1999.
The problem of sequencing the placements of multiple part types for a computer controlled placement machine is examined. The problem is modeled as a collection of interdependent traveling salesman problems. A heuristic based on a space filling curve is shown to be easy to compute and quite effective. Numerical experiments show that on problems of realistic size the heuristics show very little divergence from optimality. The probabilistic analysis of the proposed heuristic indicates that the proposed heuristics are asymptotically optimal. Finally, the heuristic is used to perform the sequencing operation on real placement machines. The results of this experiment are in accord with the numerical simulations. The main ideas have become part of the control system currently in use in a large electronic card assembly facility that produces approximately 12,000 boards per day. Improvements in throughput of between 4% and 9% have been reported.
Managing Development Risk in Product Design Processes. R.H. Ahmadi, R. Wang. Operations Research. 47(2): 235-246. March-April 1999.
Product development has become the focal point of industrial competition and is the cornerstone of long-term survival for most firms. One of the major management challenges in product development is to deal with development risk in the design process. A strategic guideline as to how the design process should be managed and controlled is provided. How design reviews and engineering resources can be scheduled as the control mechanisms to operationally manage development risk is described. The methodologies developed are an integral part of a project to fundamentally restructure product design processes at Rocketdyne Division of Rockwell International, which designs and develops liquid-propellant rocket propulsion systems.
Design of Electronic Assembly Lines: An Analytical Framework and its Application. R.H. Ahmadi, P. Kouvelis. European Journal of Operational Research. 115(1): 113-137. 1999.
The design of component assembly lines in printed circuit board (PCB) manufacturing environments is a challenging problem faced by many firms in the electronics industry. The main design approaches to such component assembly lines are the mini-line, flexible flow line, and hybrid line designs. The operational trade-offs associated with these design alternatives are discussed and a mathematical programming framework that captures relevant system design issues is presented. Each of the design alternatives can be viewed as a special case of the stated mathematical programming model. Effective algorithms are developed to solve these mathematical programs. The framework in a specified PCB manufacturing environment is used to advise managers on the best configuration of their lines. The models were used as sensitivity analysis tools. The results of the computational experiments, combined with qualitative comparisons of different design approaches developed by a cross functional team (engineers, manufacturing and product managers), have led to the development of a set of managerial guidelines for the selection of the design plan for component assembly lines in the studied environment.
Pricing in Separable Channels: The Case of Parallel Imports. B.R. Yang, R.H. Ahmadi, K.B. Monroe. Journal of Product and Brand Management. 7(4): 433-440. 1998.
Multinational companies marketing their undifferentiated products to different countries unintentionally may create a problem for themselves. A low price in one country may encourage an enterprise to transship the products to another country with higher price, creating a new channel of parallel imports that competes with the authorized channels there. By setting prices reflecting differences in willingness to pay in the different countries, multinational firms are “setting” prices for their products in separable channels. In light of this problem of parallel import channels competing with the authorized channels, multinationals need to carefully establish their pricing strategies for the global marketplace.
Managing Capacity and Flow at Theme Parks. R.H. Ahmadi. Operations Research. 45(1): 1-13. January-February 1997.
An application of a model-based approach to some of the short-term ride capacity and visitor flow issues faced by Six Flags Magic Mountain is described. Daily operations at the theme park are considered, and the generation and evaluation of alternative strategies for managing ride capacities and visitor flow are focused on. Management of demand involves 2 aspects: 1. Understanding customer preferences as revealed by routing behavior and 2. Using the model to evaluate the implications of changes in transition behavior. The data provide several insights for developing schemes to manage the day-to-day operations of the park.
Scheduling in Network Flow Shops. R.H. Ahmadi. Journal of Global Optimization. 9: 293-320. 1996.
We consider the general problem of static scheduling of a set of jobs in a network flow shop. In network flow shops, the scheduler not only has to sequence and schedule but also must concurrently determine the process routing of the jobs through the shop. In this paper, we establish the computational complexity of this new class of scheduling problem and propose a general purpose heuristic procedure. The performance of the heuristic is analyzed when makespan, cycle time and average flow time are the desired objectives.
Product/Process Design in Mass Placement Printed Circuit Board Assembly. J.H. Ahmadi, R.H. Ahmadi, J. Rao.Production and Operations Management. 4(4): 401-413. 1995.
We describe a set of models that are used to manage the product and process design in a mass placement printed circuit board (PCB) assembly cell. Our model can be divided into two categories. First, we characterize the cell design problem and develop models to design an efficient assembly cell. Second, we present models for optimizing the different operational aspects of the assembly cell. These models were developed to assist the managers of a large electronic manufacturing firm in establishing mass placement PCB assembly cells.
Component Fixture Positioning/Sequencing for Printed Circuit Board Assembly with Concurrent Operations. J.H. Ahmadi, R.H. Ahmadi, H. Matsuo, D. Tirupati. Operations Research. 43(3): 444-457. May-June 1995.
An examination is made of the problem of positioning component fixtures on the carriers of computer, numerically controlled dual delivery machines used for populating printed circuit boards with surface mounted technology. This reel positioning problem (RPP) is one of a series of optimization problems that are critical for improving system productivity and realizing the full potential of concurrent operations. The RPP is formulated as a mathematical program and its complexity is established. Since the problem is NP-complete, the development of heuristics is the focus. The solution procedure was prompted by engineering considerations that included concerns for minimizing the changes in the carrier direction and total movement. Encouraging results with test problems are presented. The method has been implemented and achieved 7%-8% reductions in cycle time.
Design of a Testing Fixture for Printed Circuit Boards. R.H. Ahmadi, P. Kouvelis. IIE Transactions. 27: 81-89. 1995.
A functional testing problem in the printed circuit card assembly environment is discussed. The testing problem the design engineer faces is the following: Assign the maximum number of 100 mil probes to an appropriately selected set of 50 mil pads in a way that avoids the creation of short circuits or other imposed engineering constraints. Once the assignment problem is solved, a testing fixture that holds 100 mil probes at their appropriate positions is constructed. An integer programming formulation of the problem is presented. A hierarchical decomposition scheme, which at a first level specifies the subset of 50 mil pads to be tested, and at a 2nd level decides on the allocation of a 100 or 50 mil probe to the tested pads, exhibits a near optimal performance for most cases of practical interest. The first-level problem can be solved in polynomial time with a greedy procedure. The 2nd-level problem is equivalent to node packing. For a special class of sparse graphs encountered in the application a simple greedy algorithm optimally solves the corresponding node packing problem.