Competing on Freight Service Quality in Supply Chains

Now is the time of the holiday season that freight carriers are extremely busy, with Christmas only 3 days away and with the memories of the delivery delays of Christmas 2013 still fresh.

In an article in today's New York Times, "Crunch Time for FedEx and UPS as Last-Minute Holiday Shipping Ramps Up," Hiroki Tabuchi writes that "UPS announced that it was hiring up to 95,000 seasonal workers, more than twice the number it employed last year. FedEx said it had hired 50,000 workers for the holidays. And both say they have invested heavily in infrastructure." The planning for this year reads like a large-scale military logistical operation with, according to the article,  FedEx saying that it has strengthened its contingency planning, after shippers were summarily slammed for delivery delays last holiday season.

Last year's delays were attributed to bad weather as well as a surge in online shopping after Thanksgiving. 

Last year's delivery debacles inspired us to work on time-based supply chain network competition and the outcome was the paper, Supply Chain Network Competition in Time-Sensitive Markets, Anna Nagurney, Min Yu, Jonas Floden, and Ladimer S. Nagurney, which was published in  Transportation Research E 70: (2014) pp 112-127. In the paper, we discuss that delays in holiday freight deliveries are not solely a US phenomenon but even happen in Sweden! We also highlight the use of alternative modes, notably, air freight, as was used to speedup deliveries of paraphernalia prroduced in China and associated with the Disney movie Frozen because of the immense demand in clothing and other gear. I can attest to this since one of my nieces had a full-fledged Frozen birthday party for her 7th birthday, complete with the Princesses Elsa and Anna making appearances!

According to the Times article, UPS also pressed retailers early for forecasts with its volume forecasting for this holiday season beginning as soon as its handlers got through last year’s chaos.
A company that did not forecast the demand for one of its products, is the iconic retailer, L.L. Bean of Maine. The demand for its boots has been astronomical (my daughter is one of the disappointed customers) with a backorder of 600,000 units (she hopes to get her pair sometime in February, way after Christmas). NPR had a nice segment on this topic and even noted the great Lafayette College vs. Lehigh U. 150th  football rivalry game at Yankee Stadium that I was at and blogged about. 

L.L. Bean sent us a letter explaining the situation with a gift of a boot keychain, which is now hanging on our tree.

Freight services are a critical component of effective and efficient supply chains and, oftentimes, they are taken for granted. During the holiday season they are challenged to the max. Since I love logistics and care about not only the quality of products but also the quality of freight service provision, out latest paper is on precisely that topic: Supply Chain Network Competition in Price and Quality with Multiple Manufacturers and Freight Service Providers, Anna Nagurney, Sara Saberi, Shivani Shukla, and Jonas Floden.

Happy Holidays, everyone, and may your packages arrive in time and in good shape!

Operations Research in Disruption Management May Have Helped UPS and FedEx with Timely Deliveries for Christmas

Many of us have enjoyed celebrating the special holidays this time of the year and  are recovering from all the wonderful and, yet, frenetic activities surrounding the shopping, decorating, cooking, visiting, and partying!

Not so for those who work for our logistics companies such as UPS and FedEx whose trucks you may have seen driving through your neighborhoods many times and even late in the evening this past week to deliver packages for Christmas, which was yesterday.

You may have also caught the news of the package shipment delays this season and were anxiously awaiting the package that you ordered for a relative, neighbor, or friend, which still has not arrived.

Timely deliveries are extremely important, especially when there is a big day such as Christmas. In fact, time is a strategic advantage, as important as cost and even quality, which we have argued in our paper:
A Supply Chain Network Game Theoretic Framework for Time-Based Competition with Transportation Costs and Product Differentiation,
Anna Nagurney and Min Yu, to appear in Optimization in Science and Engineering - In Honor of the 60th Birthday of Panos M. Pardalos, edited by S. Butenko, C. A. Floudas, and Th. M. Rassias, Springer, New York, 2014.

UPS, in a statement, reported on CNN.com, explained that "the volume of air packages in our system exceeded the capacity of our network immediately preceding Christmas so some shipments were delayed." "We know how hard it is for everyone to receive their holiday packages, and we're working around the clock to resolve this issue," UPS spokeswoman Natalie Black said.

I am sure that many out there who work (and even teach)  in operations and logistics and conduct research on this great subject had an "Aha!" moment. This sounded like the maximal flow problem in operations research, which is a classical problem, but which needed to include stochastic elements associated with possible disruptions. According to Black, UPS underestimated the volume of packages and the previous severe weather in the Dallas area had already created a backlog. Then came "excess holiday volume" during a compressed time frame, since the period between Thanksgiving and Christmas was shorter than usual this year. (Also, UPS gives their employees Christmas off, which they surely need.) This issue lit up social media on the Internet around the globe.

FedEX also apologized for some delays and noted that the company handled 275 million shipments this year between Thanksgiving and ChristmasSome FedEx custimers were able to pick up their packages at local FedEx centers that were open on Christmas day.  "We're sorry that there could be delays and we're contacting affected customers who have shipments available for pickup," said Scott Fiedler, a spokesman for FedEx Corp.

Those of us who work in disaster and disruption management (and soon I will be teaching again my Humanitarian Logistics and Healthcare course at the Isenberg School of Management) know that there are many synergies and crossovers between corporate logistics and humanitarian logistics and some of the best practices in one space can be adapted to the other.

In a special issue of the journal Transportation Research A on Network Vulnerability in Large-Scale Transport Networks, our article:  A Bi-Criteria Indicator to Assess Supply Chain Network Performance for Critical Needs Under Capacity and Demand Disruptions,
Qiang Qiang and Anna Nagurney,  appeared in volume 46(5): (2012) pp 801-812.  In this paper, we developed a supply chain/logistics network model for critical needs in the case of disruptions. The objective is to minimize the total network costs, which are  generalized costs that may include the monetary, risk, time, and social costs.  The model assumes that disruptions may have an impact on both the network link capacities as well as on the product demands. Two different cases of disruption scenarios are considered. In the first case, we assume that the impacts of the disruptions are mild and that the demands can be met.  In the second case, the demands cannot all be satisfied. For these two cases, we propose two individual performance measures. We then construct a bi-criteria measure to assess the supply chain network performance. An algorithm is described which is applied to solve a spectrum of numerical examples in order to illustrate the new concepts.

This bi-criteria measure  considers the following factors:

• Supply chain capacities may be affected by disruptions;
• Demands may be affected by disruptions; and
• Disruption scenarios are categorized into two types.

And, in order to determine whether the demands can be satisfied under a specific disruption scenario (which, of course, can include weather or another natural disaster)  we first solve the maximal flow problem, which is a classical network optimization problem in operations research.

Both UPS and FedEx perform, in general, amazing work and take advantage of advanced analytics but as this holiday season revealed there is more that can be done! As the incoming President of INFORMS, Dr. Stephen Robinson, alluded in an interview, sometimes it takes many years for research to make it into practice. I think that this needs to  change.

Are Your Students Getting Jobs at the Best Companies to Work for?

Have you ever envisioned your dream job?

I regularly ask my students where would they like to work after graduation and I ask this question of both my undergraduate and graduate students.

Some have geographical preferences (don't we all, in a sense) whereas others look for "name" companies and/or those that provide certain benefits.

Ultimately, employees will stay with an organization (company or, in the case of certain PhD graduates, a university or college) if they feel appreciated and are "happy."

Fortune has released its list of top 100 companies to work for  and what really pleased me was the list included so many companies that our graduates in Operations Management (undergrads)  and Management Science (PhDs) have been or are presently employed by. Note the majority of our PhD graduates from the Isenberg School of Management at UMass Amherst do enter academia.

At the top of the list was Google (not surprising) but second on the list was SAS, where one of my former PhD students, Dr. Padma Ramanujam,  works.  I had blogged about visiting her there last year while at the SAMSI workshop and being hosted by Dr. Radhika Kulkarni, who is a fellow recipient of the INFORMS WORMS Award. The cafeteria reminded me of places in Sweden, which I regularly write about. I had been on a dissertation committee of a PhD student at UMass in computer science and he is employed by Google.

Dr. Davit Khachatryan, who also received a PhD with a concentration in Management Science from the Isenberg School of Management, recently gave a talk at the Isenberg School, in our Meet a PhD Alum initiative, works at Price, Waterhouse, and Coopers, which is 81 on the list.

And our most recent PhD recipient in Management Science, with an official PhD receipt of February 1, 2013, is Dr. Milad Ebtehaj, whose new position is with Fedex, number 98 on the list. I have had former undergrads in Operations Management also work for Fedex, as well as for Deloitte, number 47 on the list. Ernst&Young is number 57 on this latest ranking, and one of our former Jack Welch scholars is employed by this company in Boston. I have a warm spot for Ernst&Young because of the recognition that I received from them for my mentoring activities (Thanks!).

I could list more connections between our graduates and the best companies to work for but I will stop here.

Congrats to all the companies that made the list, which, even if they do not employ our graduates now,  they may do so in the future. In any event, it is clear that being good to employees is good for business! Have you ever seen an unhappy employee at Whole Foods?

Real Generals Talk Logistics and Winning in the Great Restructuring

There is an old military saying, which speaks volumes:

Armchair generals talk strategy. Real generals talk logistics.

Rich Karlgaard, the publisher of Forbes magazine, recalls this saying in his outstanding column on Innovation Rules: Ten Tips: Restructuring Winners, in which he identifies what elements will help corporations in the great restructuring, which necessarily follows a great recession. Frankly, there is a lot of relevance in his excellent advice to other organizations, including universities. He identifies successful companies such as: FedEx, Southwest Airlines, Microsoft, Apple, Genentech, SAS, and Oracle, which were started during the "rotten decade of the 1970s," during which IBM also managed to flourish.

What struck me about his ten tips for winning in the great restructuring, was that half of them I would classify under the heading of analytics, from his emphasis on identifying where costs can be reduced in your operations, to speeding up your deliveries, to providing leadership in service, as well as in design. But my favorite, was his statement:

PICK A LEADER IN ANY FIELD AND YOU'LL FIND SUPERB LOGISTICS AND SUPPLY CHAINS UNDERNEATH. He singles out Wal-Mart and Amazon.com for their superior logistics.

As for the remainder of his tips, they round out what are fundamental to the success of corporations and organizations, alike. He advises to seek out the best talent, and quotes Bill Gates as stating that a great programmer is worth ten thousand times the price of only a good programmer. What really resonated with me, as well, was his emphasis on the importance of both internal and external communications (with IBM being a model for the latter and the military for the former). Excellent communications is one of my "pet peeves," and I wonder how much we have lost in the realization of the full potential of organizations because some of those "in command" did not provide the necessary information and did not get the important news disseminated.

Karlgaard ends by noting that integrity is essential and that everyone should know your purpose (see, it's about communication, here, too). I'll skip one of his tips -- branding, and will leave that to my marketing colleagues.

And, as for logistics, one of my undergrad students, who took my Transportation & Logistics class last term stopped by my office yesterday to seek advice because he wants a job in this industry, since logistics is his passion. I am sure that he will succeed.

If you wish to learn more about logistics and supply chains, please come to our Northeast Regional INFORMS conference at UMass Amherst, May 6-7, 2011. Information on a relevant tutorial at this conference is below.

Transforming U.S. Army Supply Chains: Management Innovation in DoD for Improved Efficiency, Productivity, and Cost-Effective Global Operations

Greg H. Parlier, Colonel, U.S. Army (retired)
Former Deputy Commander for Transformation, U.S. Army Aviation and Missile Command
President, INFORMS Military Applications Society.