Opportunities for Doctoral Students to Speak at Regional Conferences

There are so many advantages to going to professional conferences from the networking and exchange of ideas and research results to seeing new places and even practicing your public speaking skills.

It is especially important for doctoral students to have opportunities to present at conferences.

Our major professional conferences usually take place only once a year from the INFORMS conference to the POMS conference. However, if you keep your eyes open you might find that there are conference opportunities in your region. Sometimes you may even still be able to sleep in your bed.

For example, 6 years ago we co-organized the First (and so far the only) Northeast Regional INFORMS conference at UMass Amherst. 

We had a blast. With a team that included Professor Hari Balasubramanian of the Mechanical and Industrial Engineering Department at UMass Amherst and Dr. Les Servi of MITRE, plus a lot of help from the wonderful UMass Amherst INFORMS Student Chapter, the conference was a big success. It took place in May with flowers blooming. Plenary addresses were delivered by Dr. Brenda Dietrich of IBM, Professor Alex "Sandy" Pentland of the MIT's Media Lab, and Professor David Simchi-Levi of MIT. Dietrich spoke on a Smarter Planet; Pentland on Building A Nervous System for Humanity: Making Health, Financial, Logistics, and Transportation Networks Work; and Simchi-Levi on Flexibility - From Theory to Practice. Tutorials were given on Transforming U.S. Army Supply Chains and Modern Design of Experiments - Recent Advances in Screening Methods. In addition, panels were organized on: The Academic Job Search Process, Research in Academia and Industry, and How to Run a Successful INFORMS Student Chapter.

The Isenberg School of Management Dean Dr. Mark A. Fuller provided welcoming remarks.  Mary Magrogan of INFORMS and Tracy Byrnes (now Cahall) of  INFORMS came out to support us and were a great help.

I posted some photos from this conference on this blog. 

When I saw that the Decision Sciences Institute (DSI) would be holding its Northeast Conference (NEDSI) this month in Springfield, Massachusetts, I thought that this would be a nice opportunity for doctoral students in Management Science at the Isenberg School to present their work. Some of my former doctoral students have presented at DSI but I have never been to this conference.

Springfield is only about 30 minutes from Amherst, Massachusetts and is the site of the Basketball Hall of Fame, some wonderful museums, and the Dr Seuss National Memorial Sculpture Garden.

The chair of the NEDSI conference is Dr. Minoo Tehrani of Roger Williams University, where one of our former doctoral students, Dr. Farbod Farhadi, is on the faculty of its business school. The university is located in beautiful Rhode Island on the ocean.

The NEDSI conference brochure was posted online today with the program.

My group will be presenting 3 papers there:

1. A Game Theory Model for Freight Service Provision Security Investments for High Value Cargo, which I co-authored with my doctoral student, Shivani Shukla, my former doctoral student, Dr. Sara Saberi, now a professor at the Foisie School of Business at WPI, and Professor Ladime S. Nagurney of the University of Hartford. Shivani will be presenting this paper.

2.  Supply Chain Network Capacity Competition with Outsourcing: A Variational Equilibrium Framework, co-authored with my doctoral student, Deniz Besik, and former doctoral student, Dr. Min Yu, now Professor at the Pamplin School of Business at the University of Portland. This paper is now in press in the Journal of Global Optimization. Deniz will present the paper.

3. Competition for Blood Donations: A Nash Equilibrium Network Framework, co-authored with doctoral student Pritha Dutta, whose dissertation I am co-chairing. Pritha will present our paper.

There will be a banquet on Saturday, as part of the conference, which will be a nice reward for the doctoral students' hard work!

Why We Wrote the Competing on Supply Chain Quality Book

I was thrilled when my new book, "Competing on Supply Chain Quality: A Network Economics Perspective," was published last month by Springer. The book was co-authored with my former doctoral student at the Isenberg School of Management, Dong Li, who is now an Assistant Professor at the School of Business at Arkansas State University. The book is the second book in the new Springer Series on Supply Chain Management that is edited by Distinguished University Professor Christ Tang of UCLA's Anderson School of Management.

We had conducted research on supply chain networks with a focus on quality for over half a decade.

The book was published last month, June 2016, and a box of copies arrived at the Isenberg School but I was at Oxford University as a Visiting Fellow at All Souls College for the Trinity term. Luckily, Christine Crigler of Springer was gracious to express mail two copies to me at Oxford.  Although this is my 13th book, the excitement of seeing the package and opening it up and then looking through your new book is always thrilling.

My co-author at that time was still visiting China but upon my return to Massachusetts, we were delighted to see each other and to look at the book together.

Writing the book was a passion and it was done in the US, while I was also in Sweden, as a Visiting Professor at the University of Gothenburg, and everything was finalized recently.

The study of supply chains, a critical area of both operations research and operations management has, interestingly, evolved completely separately from the literature on quality management, another much studied topic in operations management that has a long history. Moreover, there had been numerous instances of product failures that had resulted in not only such negative effects on humans as illnesses but even death. Consumers, when they purchase infant formula want to make sure that it is safe; the same holds for the cars that we drive, the food that we eat, and the high technology products that we use, to start.  Frankly, in many cases when we would read news articles, noting medicines that not only did not do the job that they were designed for but actually injured people, or airbags that would explode and injure people, or ignition switches that resulted in accidents and the death of young people, we were, frankly, furious!

As scholars and educators what we can do is do research so we began to develop supply chain network models that were realistic and that were computable. This was critical since much of the literature would consider only very small supply chains that one would never see in practice (but might be easy to solve and get some insights for). Clearly, producers in many cases would have more information about the products that they had manufactured than consumers would so we explored information asymmetry and also the impacts of minimum quality standards. An issue in our work that was fundamental was to give a precise definition of what we meant by quality. Quality sometimes has a rather qualitative flavor and we cared about quantitative measures.  W also wanted to quantify the impact on a firm's reputation if there were quality failures of is products. In contrast to much of the other literature, we also considered decentralized decision-making as opposed to centralized decision-making. Hence, we utilized network theory, optimization theory, and also, importantly, game theory to explore competition.

Our passion for product quality and the reality of globalization and outsourcing also drove us to develop supply chain network models with explicit supplier selection and make or buy decision-making and associated quality.  We were also able to develop a framework, which I am very proud of, that identifies the importance of suppliers to a firm's supply chain network and that of the supplier to the supply chain network economy. Clearly, one can then rank suppliers accordingly and, this provides decision-makers with important tools of assessment. Pay attention to those suppliers that affect you bottom line, should their production be disrupted, be it because of natural disasters  or other events.

Of course, since transportation has always been my love, along with logistics, we also explored the meaning of quality in freight. You want to make sure that Christmas trees arrive in time for the holiday, that the goods that you ordered are not damaged, and that the food does not spoil in transit!

Our research was documented in a series (many) papers since this was essential to get peer review done. After close to a dozen papers on the paper it became essential to synthesize all of our material and the book was the result.

The passion for product quality and supply chain networks continues as will the research.

Another thrill was seeing our book on display at the EURO 2016 conference in Poznan, Poland, which took place July 3-6, 2016, and which I wrote enthusiastically about in a previous blogpost. 

And, yesterday, we celebrated the publication of our book in a meaningful way and I expect there will be more celebrations.

Thanks to UMass Amherst for noting our new book by the News Office. This was a great collaboration, which continues.

Great Tune-Up for the INFORMS Conference with the UMass Amherst INFORMS Student Chapter at Isenberg!

On Friday, I returned from Chicago, where I had been at Northwestern University for a fabulous book launch, just in time to watch our great PhD students present the papers that they will be delivering at the INFORMS Annual Meeting in Philadelphia, November 1-4, 2015.

Such a tune-up has become an annual event for the UMass Amherst INFORMS Student Chapter and this year we had 5 presentations as noted in the poster above. The speakers are in the photo below.

The turnout was great (and PhD students are quite busy and it was a Friday afternoon). Even several faculty showed up from  both the Department of Mechanical and Industrial Engineering and the Isenberg School to support their students - thank you!

Below are some photos that I took of the student speakers and audienc. It was a great opportunity to share research with colleagues and also to get feedback from the audience. Refreshments were served, questions answered, and it was fun. We lingered afterwards to continue to discuss how the presentations could be improved. It was also great for students who had never presented at INFORMS conference to see how such presentations are done.

Looking forward to the INFORMS conference in Philadelphia just one week away!

And the UMass Amherst INFORMS Student Chapter will be receiving the Summa Cum Laude Award from INFORMS at the meeting on November 2, 2015. As its Faculty Advisor for 11 years, I could not be happier and prouder of this great group of students!

My 18th PhD Student - Another Successful Dissertation Defense

Yesterday, was a very happy day since my 18th PhD student, Dong "Michelle" Li successfully defended her doctoral dissertation in Management Science at the Isenberg School of Management.

The title of her dissertation, which was nearly 250 pages long, was: Quality Competition in Supply Chain Networks with Applications to Information Asymmetry, Product Differentiation, Outsourcing, and Supplier Selection.

Michelle did a great job presenting, although we had to do some disruption management since in her scheduled room there was a final exam taking place and then an hour into her presentation in another room, another group of students entered for their final exams.

Michelle's full presentation can be downloaded here and it is stunning and her delivery was great, too.


Special thanks to the great committee members: Professor Adam Steven of my very own Operations and Information Management Department, Professor Hari Balasubramaian of the Department of Mechanical and Industrial Engineering, and Professor Christian Rojas of the Resource Economics Department for all their valuable inputs and also for helping Michelle in her academic job search process. She has had more on-campus interview invitations and visits than any of my former students but I expect, given her offers, that she will soon reach closure.

Michelle has an outstanding record of publications in such journals as the Annals of Operations Research, the International Transactions in Operational Research, Computational Economics, Computational Management Science, Netnomics, and the International Journal of Sustainable Transportation, with a series of other articles in review in other journals.

She has worked very hard as an Officer of the award-winning UMass Amherst INFORMS Student Chapter and even taught 3 sections of our required Operations Management undergraduate course at the Isenberg School. Both of her parents are academics in China and she told me that 18 is a lucky number in China.

Great to see my academic offspring genealogy tree growing.

Interestingly, my 17th PhD student, Dr. Amir H. Masoumi, told me that 17 was always his favorite number.

Competing on Quality and Supply Chain Networks

Quality was recognized already by Feigenbaum in 1982 as the single most important force leading to the economic growth of companies in international markets. Also, Buzzell and Gale in 1987 in their book, The PIMS Principles: Linking Strategy to Performance, recognized that, in the long run, quality is the most important factor affecting  business unit's performance and competitiveness relative to the quality levels of its competitors.

So, why are we seeing so many examples of quality failures?

Recent shocking examples have included  revelations, as reported by Bloomberg News, that consumers in both China and Japan of hamburgers, chicken nuggets and other products that they bought from some of the world’s best-known food chains -- including McDonald’s Corp. (MCD) and Yum! Brands Inc. (YUM)’s KFC and Pizza Hut -- were made with spoiled meat.The meat came from a Chinese unit of OSI Group Inc., which is based in Illinois and is a global food processor. Allegations have included also that meat that was dropped on the ground was then scooped up and processed further. 

Or what about the case of Takata Corp., which is the world's second largest supplier of airbags for automobiles. There are ongoing recalls called for by four Japanese car manufacturers and even BMW since the airbag inflator may rupture and injure passengers and may also catch on fire.

And as K.R. Karu eruditely wrote on the Sparta Systems blog on the topic of supplier quality management (and lack thereof): A few years ago, a single supplier of a peanut based ingredient single handedly impacted the entire peanut based food industry.  This company supplied a contaminated ingredient that was used by over 390 separate companies in nearly 4,000 different peanut products, including peanut butter, candies, oils and more.  The results were over a billion dollars in losses to the industry, with peanut butter sales dropping by more than 25%, regardless if the ingredient was used in the product or not.  More important than these financial losses was the danger to the consuming public.  Over 700 people were made ill by this contamination, and there were 9 confirmed related deaths.  The supplier was forced to close their doors, and criminal charges were brought against the executives of this company.

The biggest asset of any company is its reputation and quality failures, as we are seeing now even with General Motors, and the faulty ignition switch, can have lasting impacts and affect the bottom line because of costly recalls.

Quality management and how to compete on quality in a supply chain context are topics that we have been deeply researching over the past several years. Whether it is food or pharmaceuticals or consumer goods such as cars or high tech products, we all want and deserve for our hard-earned cash to have the quality in our products that we expect and have paid for.

Our first paper on product quality, in which we considered a single firm, with a focus on pharmaceuticals, with multiple manufacturing plants and multiple possible outsourcers, was: Pharmaceutical Supply Chain Networks with Outsourcing Under Price and Quality Competition, Anna Nagurney, Dong Li, and Ladimer S. Nagurney, International Transactions in Operational Research 20(6): (2013) pp 859-888. In this paper we captured the cost of disrepute, or the cost associated with a firm's reputational loss due to inferior quality. In this paper the demand for the product was fixed at the various demand markets.

In the next paper, which we have just revised, and expect to hear good news on soon, A Supply Chain Network Game Theory Model with Product Differentiation, Outsourcing of Production and Distribution, and Quality and Price Competition, Anna Nagurney and Dong Li, we captured competition among multiple firms who compete in quantities and quality and also have the options of outsourcing the production and delivery of their products, which are differentiated by brands. Here, again, we assumed fixed demands and also included the cost of disrepute.

In the paper, A Dynamic Network Oligopoly Model with Transportation Costs, Product Differentiation, and Quality Competition, Anna Nagurney and Dong Li, Computational Economics 44(2): (2014) pp 201-229, which was just recently published, we demonstrated how firms adjust their quality levels and quantities over time through a dynamic adjustment process until an equilibrium is achieved. The consumers now respond to the quality levels and quantities of the products through the prices that they are willing to pay for the differentiated products.

And, in a paper, just published last week, Equilibria and Dynamics of Supply Chain Network Competition with Information Asymmetry in Quality and Minimum Quality Standards, Anna Nagurney and Dong Li, Computational Management Science 11(3): (2014) pp 285-315, we investigated, in a supply chain network context, the impacts of information asymmetry. If producers know the quality of their products, but consumers only know the average quality, what can happen? This kind of quality information asymmetry was introduced (but not in a supply chain context) by George Akerlof in his famous lemons paper in 1970 (which was rejected 3 times by journals and finally published and he was awarded the Nobel Prize in Economic Sciences in 2001 for this work). Akerlof's paper is: "The market for `lemons': Quality uncertainty and the market mechanism," Quarterly Journal of Economics, 84(3), 488-500. Akerlof shared the Nobel with Professor Joseph Stiglitz and Michael Spence. In our paper, we show how critical it is for policy-makers to work together on the imposition of minimum quality standards so that the do-gooders don't get cheated in terms of profits and so that consumers also don't lose out.

Do You Know Where Your Meds and Other Products Came From - Information Asymmetry in Quality

I am excited about speaking at the upcoming  Learning and Intelligent Optimization (LION 8)  Conference in Gainesville, Florida later this month, especially since the snow is again falling in Massachusetts with more to come!

I am also excited because this will be the first time that I will be presenting the paper, "Equilibria and Dynamics of Supply Chain Network Competition with Information Asymmetry in Quality and Minimum Quality Standards," joint with one of my doctoral students, Dong "Michelle" Li.

Quality of products, especially those that one ingests, from pharmaceuticals to food and even, in a sense, human blood (and I am not talking about vampires here), is a topic of great concern and one that we have been researching for a while now.


Do you know where your medicines, for example,  are coming from?
 

As we noted in our earlier paper,  Pharmaceutical Supply Chain Networks with Outsourcing Under Price and Quality Competition, Anna Nagurney, Dong Li, and Ladimer S. Nagurney, International Transactions in Operational Research 20(6): (2013) pp 859-888, up to 40% of the drugs that Americans take are now imported, and more than 80% of the active ingredients for drugs sold in the United States are outsourced, often to countries such as India and China. The problem is that there may not be sufficient oversight and lack of quality standards.


Furthermore, the manufacturing of products, including pharmaceuticals, may take place in multiple manufacturing plants, so one may have no idea as to the place of production or the level of quaality!


In our new paper, which focuses on quality competition under information asymmetry, we were inspired by the work of the Nobel laureate George Akerlof and his classical paper 1970 paper (which got rejected 3 times by journals, before it finally got accepted and for which he earned the Nobel prize):  "The market for `lemons': Quality uncertainty and the market mechanism," Quarterly Journal of Economics, 84(3), 488-500. Akerlof shared the Nobel with Professor Joseph Stiglitz and Michael Spence.

In our paper, we construct a  supply chain network model with information asymmetry in product quality. The competing, profit-maximizing firms with, possibly,  multiple manufacturing plants, which may be located on-shore or off-shore, are aware of the quality of the product that they produce but consumers, at the demand markets, only know the average quality. Such a framework is relevant to products ranging from certain foods to pharmaceuticals. We propose both an equilibrium model and its dynamic counterpart and demonstrate how minimum quality standards can be incorporated. Qualitative results as well as an algorithm are presented, along with convergence results. The numerical examples, accompanied by sensitivity analysis, reveal interesting results and insights for firms, consumers, as well as policy-makers, who impose the minimum quality standards.

Specifically, we find from the computations the following.  Since consumers at the demand market do not differentiate between the products from different firms, and there is information asymmetry in quality between the firms (sellers) and the consumers (buyers) at the demand market, the average quality level at the demand market, as well as the price, which is determined by the quality levels of both firms, is for both firms' products. Firms  prefer a higher average quality, since, at the same demand level, a higher average quality results in a higher price of the product.

However, once a firm increases its own quality level, of course, the average quality level and, hence, the price  increases, but its total cost will also increase due to the higher quality. Furthermore, the price increase is not only for the firm's own product, but also for its competitor's product. If a firm increases its own quality, both the firm and its competitor would get the benefits of the price increase, but only the firm itself would pay for the quality improvement. Thus, a firm prefers a “free ride,” that is, it prefers that the other firm improve its product quality and, hence, the price, rather than have it increase its own quality.

Consequently, a firm may not be willing to increase its quality levels, while the other firm is, unless it is beneficial both cost-wise and profit-wise. This explains why, as the minimum quality standard of one firm increases, its competitor's quality level increases slightly or  remains the same.

When there is an enforced higher minimum quality standard imposed on a firm's plant(s), the firm is forced to achieve a higher quality level, which may bring its own profit down but raise the competitor's profit, even though the latter firm may actually  face a lower minimum quality standard. When the minimum quality standard of a firm increases to a very high value, but that of its competitor is low, the former firm will not be able to afford the high associated cost with decreasing profit, and, hence, it will produce no product for the demand market and will be forced to leave the market.

The above results and discussion indicate the same result, but in a much more general supply chain network context, as found in Ronnen (1991), who, in speaking about minimum quality standards,   noted that: ``low-quality sellers can be better off ... and high-quality sellers are worse off." Also the computational results support the statement on page 490 in Akerlof (1970) that ``good cars may be driven out of the market by lemons." Moreover, our results also show that the lower the competitor's quality level, the more harmful the competitor is to the firm with the high minimum quality standard. The implications of the sensitivity analysis for policy-makers are clear -- the imposition of a one-sided quality standard can have a negative impact on the firm in one's region (or country). Moreover, policy-makers, who are concerned about the products at particular demand markets,  should prevent firms located in regions with very low minimum quality standards from entering the market; otherwise, they may not only bring the average quality level at the demand market(s) down and hurt the consumers, but such products may also harm the profits of the other firms with much higher quality levels and even drive them out of the market.

Therefore, it would be beneficial and fair for both firms and consumers if the policy-makers at the same or different regions or even countries could impose the same or at least similar minimum quality standards on plants serving the same demand market(s). In addition, the minimum quality standards should be such that they will not negatively impact either the high quality firms' survival or the  consumers at the demand market(s).

Walter Isard Memorial Volume, Disaster Relief, and Humanitarian Logistics

Who has influenced you in your research and has had an impact on your academic and professional success?

Through membership in professional societies we get to meet luminaries in our fields and, have you noticed that, many of the "giants" are actually also super nice people. In order to build a field or discipline you need followers and charisma and kindness as well as vision are just some of the attributes that make great leaders.

And two scholarly giants that I had the privilege of meeting and interacting with who, sadly, are now deceased, but lived to over the age of ninety, are Professor George Dantzig, the operations research megastar, and Professor Walter Isard, the founder of regional science.  Coincidentally, they were both, more or less, physically, my height. Of course, my doctoral dissertation advisor, Professor Stella Dafermos, the second female PhD in operations research in the world, who also introduced me to regional science through the literature and conferences, was the third immense influence on me. She passed away at age 49.

And, speaking of operations research and regional science, my most recent conference was the INFORMS Conference in Minneapolis (I posted many photos here) and my next one will be the 60th Annual North American Meetings of the Regional Science Association International conference in Atlanta next month.  For the latter, I have organized a special session in honor of Professor David E. Boyce, another amazing scholar and gentleman,  to mark his 50th consecutive such conference -- incredible  and the conference program with my session can be viewed here.


I will also be presenting a paper in one of the special memorial sessions in honor of Professor Walter Isard. The paper is entitled, "An Integrated Disaster Relief Supply Chain Network Model with Time Targets and Demand Uncertainty,"  Anna Nagurney, Isenberg School of Management, University of Massachusetts; Amir H. Masoumi, Manhattan College; Min Yu, University of Portland, and it is also an invited paper for a special memorial volume in honor of Walter Isard.   Our motivation for this research stems from the fact that the number of natural disasters and their impacts are increasing across the globe, so there is a great  need for effective preparedness against such events. Also, we all remember Superstorm Sandy whose first anniversary we will sadly be marking later this month.

Manhattan without electric power October 30, 2012 as a result of the devastation wrought by Superstorm Sandy.

In our paper, we construct a supply chain network optimization model for a disaster relief organization in charge of obtaining, storing, transporting, and distributing relief goods to certain disaster-prone regions. The system-optimization approach minimizes the total operational costs on the links of the supply chain network subject to the uncertain demand for aid at the demand points being satisfied as closely as possible. A goal programming approach is utilized to enforce the timely delivery of relief items with respect to the pre-specified time targets at the demand points. Aspectrum  of numerical examples illustrates the modeling and computational framework, which integrates the two policies of pre-positioning relief supplies as well as their procurement once the disaster has occurred.

And, would you believe, the Nobel Laureate in Economic Sciences and proponent of economic geography and renowned scholar and OpEd writer, Paul Krugman, wrote a piece in The New York Times, while many of us were at the INFORMS conference, that  I just had a chance to catch up with. The OpEd is entitled: Trends in Interregional and International Trade. Krugman  begins it with: Well, I’ve just paid my first personal price for the shutdown; I’m trying to finish a paper for the Walter Isard memorial volume, and discovered that the International Trade Commission’s invaluable Dataweb is shut down. I know, people are missing essential medical care and more, and I’m complaining about a slight academic inconvenience. But it’s a symptom. 

What a small world and how cool is this?! I assume that Krugman is contibuting to the same Isard memorial volume as I am.

Also, speaking of disaster relief and humanitarian logistics, my former doctoral student, Tina Wakolbinger, who is now a Full Professor at the Vienna University of Economics and Business in Austria, and who took part with me in the AAAS Symposium on Dynamics of Disasters, along with Professors Panos M. Pardalos, Laura McLay, Jose Holguin-Veras, and David McLaughlin last February in Boston shared with me her recent great news: She is the recipient of a 180,000 euro grant from the Austrian Fund for the project: "Optimal Pricing Policies and Contracts of Outsourcing Humanitarian Logistics Activities."

I last saw Tina this past March when I taught a course at her university in Vienna on Humanitarian Logistics and Healthcare.  I think that I made an impact since one of the students in my course is now interested in applying for a PhD in this area and I will be writing him a letter of recommendation.

Supply Chain Game Theory and Product Quality -- It's About Your Reputation

Quality of its products is the basis of a firm's reputation.

And, needs for improvements in product quality drive innovation.

Quality is what we, as consumers, seek in the food that we eat, the clothes that we wear, the toys that our children (and, perhaps, even we) play with, the latest high tech products that we crave, the life-saving and prolonging medicines that those in need take, the cars that we drive, the planes that we fly in,  the homes that we live in and the appliances that we use, and, of course,  the air that we breathe.

As supply chains have become more global the news about quality product shortcomings around the world is reaching beyond borders and is shocking from the Bangladesh disasters and fast fashion to the adulteration of milk and infant formulas   to the heparin adulteration which led to a pharmaceutical identity crisis, to the mysterious food-borne illness from lettuce served at Red Lobster and Olive Garden, to name just a few. Moreover, the manufacturing processes themselves may lead to the worsening of the quality of the air and the environment as has been well-documented, especially, most recently in China..


Many firms are identified by their products and their products are their brands. 

Game theory can illuminate not only which supplier a firm should select but also whether to outsource or to manufacture/produce the product in-house and the associated impacts on costs, revenues, and profits.

But game theory can help firms to do even more in terms of quantifiable analysis and evaluation and this is why game theory is so powerful. It enables us to  quantify the loss in a firm's reputation through a disrepute cost if the quality of the delivered product is substandard.

It is essential to capture the possible loss in reputation as we have done in two papers. In the first paper, we focused on the pharmaceutical industry, and in the second, we captured competition among firms with outsourcing options, which is applicable to many different industries. In the latter, firms compete in quality and the firms that they possibly outsource to compete in prices and quality, as well. However, it is the original firms' reputation that gets damaged if the outsourced product is lower in quality.

The first paper noted above is  Pharmaceutical Supply Chain Networks with Outsourcing Under Price and Quality Competition, Anna Nagurney, Dong Li, and Ladimer S. Nagurney, in press in the International Transactions in Operational Research. Here we assume that the original firms have perfect quality, whereas the firms that they outsource to compete on quality but they seek to maximize their profits.

The second paper is  A Supply Chain Network Game Theory Model with Product Differentiation, Outsourcing of Production and Distribution, and Quality and Price Competition, Anna Nagurney and Dong Li. In it, we propose both static and dynamic supply chain network game theory models, whose solution provides each original firm with its optimal in-house quality level as well as its optimal in-house and outsourced production and shipment quantities that minimize the total cost and the weighted cost of disrepute, associated with lower quality levels and the impact on a firm’s reputation. The algorithm that we propose and implement tracks the dynamic trajectories in discrete time of the evolution of the product flows, quality levels, and prices over space and time until the equilibrium state is achieved. We provide numerical examples that illustrate the model and computational framework.

Also, in our paper, A Dynamic Network Oligopoly Model with Transportation Costs, Product Differentiation, and Quality Competition, Anna Nagurney and Dong Li, in press  in Computational Economics, we developed a new dynamic model of Cournot-Nash oligopolistic competition that includes production and transportation costs, product differentiation, and quality levels in a network framework. The production costs capture the total quality cost, which, in turn, can also represent the R&D cost. With better R&D, firms may ensure that the consumers get the quality that they expect and deserve.

The above supply chain game theory models that we have constructed also allow for policy evaluations and the investigation of such a question as:  What if a government would impose a minimum quality standard for a type of product?

Pretty cool how game theory can illuminate so much in terms of operations in the real world!

Should Pharmaceutical Production be Outsourced -- Competing on Quality

With the 2013 INFORMS Healthcare Conference in full swing in Chicago, I thought it appropriate to highlight some recent research on quality competition and the outsourcing of the production of pharmaceuticals (medicines).

Medicines are essential to healing and, hence, their quality is paramount to health.

I have written on healthcare supply chains on this blog on multiple occasions from the broken humanitarian healthcare supply chain to medical nuclear supply chains to advanced analytics for pharmaceutical supply chains.  Our book, Networks Against Time: Supply Chain Analytics for Perishable Products, published by Springer in 2013, contains several chapters focused on healthcare supply chains.

And, my most recent PhD student at the Isenberg School of Management, in Management Science,  Amir H. Masoumi, successfully defended his dissertation entitled Supply Chain Management  of Perishable Products with Applications to Healthcare, so clearly there is also great interest in healthcare applications among our students. My interest in healthcare supply chains, grew in part, because of the work with Amir, beginning with blood supply chains, which was a special interest of his.

Professor Hari Balasubramanian, who is the Program Chair of the 2013 INFORMS Healthcare Conference, was on Amir's doctoral dissertation committee.

Most recently, we have been researching quality competition, beginning with the paper, A Dynamic Network Oligopoly Model with Transportation Costs, Product Differentiation, and Quality Competition, Anna Nagurney and Dong Li, which is in press in the journal, Computational Economics.

Given the importance of healthcare and pharmaceuticals, as well as the growth in the outsourcing of pharma production globally, along with numerous issues raised in terms of quality, it was important to investigate how math modeling could contribute to issues of quality, reputation, outsourcing, and competition.

Our paper, Pharmaceutical Supply Chain Networks with Outsourcing Under Price and Quality Competition,
Anna Nagurney, Dong Li, and Ladimer S. Nagurney, is now in press in the journal, International Transactions in Operational Research. This paper quantifies the effects of quality levels on a firm's reputation and develops a game theory model of outsourcing for a pharmaceutical firm. We developed both a static version (at the equilibrium state) and a dynamic version to illustrate how the quantity and quality levels evolve over time. We utilized variational inequality theory for the former and projected dynamical systems for the latter.

Math modeling, operations research (O.R.), and analytics are contributing tremendously to the understanding of healthcare issues in our society. Doing Good  with Good O.R. continues as a theme of our profession.

Global Ports, Maritime Development, the Panama Canal, and Logistics

I returned only a few hours ago from Gothenburg, Sweden and this is my first blogpost since my magical two week trip to the University of Gothenburg, Sweden.

I even got used to typing on the Swedish keyboard while there.

During my journey back (a flight from Gothenburg to London Heathrow, a 3 hour layover, then the 7 hour flight back to Boston Logan on a packed flight, plus (not fun) a two hour wait at Logan for the shuttle back to Amherst), followed by a 2 hour ride, I intellectually consumed both my weekend copy of The International Herald Tribune and the latest edition of the The Economist, both of which I had purchased at the Gothenburg airport. As an aside, I highly recommend the giftshop there -- simply fabulous -- and I will enjoy distributing the souvenirs that I purchased this week.

The Economist had an article on maritime ports, focusing on the prospectus for development of ports in Portugal. I enjoyed seeing the map in the article, that also featured Gothenburg, Rotterdam, and Antwerp.

Coincidentally, just the day before, I had attended a truly marvelous seminar given by Prof. Dr. Theo Notteboom (the 2 hour seminar felt like 2 minutes to me) at the Chalmers University of Technology in Gothenburg. Above is a photo of Dr. Notteboom prior to his seminar.

This seminar was brought to my attention by my wonderful hosts at the University of Gothenburg and since I had completed giving my 5 talks, had had many stimulating discussions with faculty, students, postdocs, and staff members, I was very interested in learning more about maritime transportation. The announcement of the seminar that I received is below.

Northern LEAD Seminar: Revisiting the investment strategies of global container terminal operators

You are welcome to the following seminar:
When: March 23 at 2-4 PM (it may end earlier)
Where: Room 3452 at MORE at Chalmers (detailed information how to get there will follow later)

During this seminar Professor Theo Notteboom will discuss the investment strategies of global terminal operators. Prof. Dr. Theo Notteboom is president of ITMMA (Institute of Transport and Maritime Management Antwerp, an institute of the University of Antwerp, Belgium www.itmma.ua.ac.be). He is also professor at the University of Antwerp, a part-time professor in maritime transport at the Antwerp Maritime Academy and a visiting professor at several universities in Europe and Asia. He published widely on (trans)port and maritime economics. Theo Notteboom regularly acts as expert for organizations such as the European Sea Ports Organization (ESPO), OECD and the European Commission. He is president of the International Association of Maritime Economists (IAME) and chairman of the Board of Directors of the Belgian Institute of Transport Organizers (BITO), an institute of the Belgian Federal Government. He is a fellow of the Belgian Royal Academy of Overseas Sciences, Associate Editor of Maritime Policy and Management and a member of the editorial boards of five academic journals.

Learning about the evolution of maritime container terminal port operators globally and especially about European issues was fascinating. The role of intermodal transportation (barges, rail, and truck) that follows, stimulated interesting questions and my brain was buzzing with new ideas and modeling questions.

On my flight leg from Gothenburg to London, I was seated (the serendipity of travel) next to a couple who was flying to Miami with friends and then taking a cruise through the Panama Canal (the deepening of the canal to allow for even larger container ships to transit was one of many topics highlighted at the seminar the day before and something I have even discussed with my undergraduate students in my transportation & logistics class). Plus, the gentleman seated next to me works in fast fashion in Sweden (not H&M) but for a newer company that does a lot of outsourcing in China. The conversation on logistics and maritime transportation that we had taught me something that I was not aware of. His company uses Swedish Post to handle all of the logistics, while the company focuses on its core competencies of fashion design!

Perhaps handling more global logistics and supply chains might be the salvation of the US Post Office!

2010 Computational Management Science Conference in Vienna, Austria

I am preparing my talks for the 2010 International Conference in Computational Management Science, which will take place in glorious Vienna, Austria, July 28-30, at the University of Vienna. I am very much looking forward to this conference.

Besides giving the invited keynote talk, "Supply Chain Networks: Challenges and Opportunities from Analysis to Design," I will also be presenting, "Supply Chain Network Design for Critical Needs with Outsourcing," which is based on the paper forthcoming in the journal, Papers in Regional Science, with my doctoral student, Min Yu, and Professor Qiang "Patrick" Qiang of Pennsylvania State University in Malvern.

The latter presentation will be given in the invited session: Supply Chains, Transportation and Networks that I organized. Other presenters in this session and their papers are:

Mr. Thomas Seyffertitiz of the Vienna University of Economics and Business (the largest business school in Europe) will be speaking on "Vulnerability and Disruption Analysis in Supply Chain Networks: A Layered Network Perspective;"

Professor Tina Wakolbinger of the Fogelman College of Business and Economics at the University of Memphis in Tennessee, will deliver the talk, "An Analysis of Impacts Associated with Earmarked Private Donations for Disaster Relief," which is based on joint work with Professor Fuminori Toyasaki of York University in Canada, and

Professor Patrizia Daniele of the Department of Mathematics and Computer Science at the University of Catania in Italy will present: "Supply Chain Networks and Infinite Dimensional Duality Theory."

The list of invited keynote speakers can be found here.

The program with accepted talks and schedule can be downloaded here.

Supply Chain Network Design for Critical Needs at NetSci2010

I will be at MIT for the NetSci2010 Conference over the next couple of days and will be presenting the paper, "Supply Chain Network Design for Critical Needs with Outsourcing." The paper has been accepted for publication in the journal, Papers in Regional Science. The presentation may be downloaded here. I will be going with one of my doctoral students, Min Yu, who is a co-author with me of the paper, along with Dr. Qiang "Patrick" Qiang.

The conference should be very interesting and the venue of the Media Lab should be perfect. I am looking forward to seeing many colleagues there.

Will be Speaking on Supply Chain Network Design for Critical Needs at NetSci2010

The NetSci2010 Conference will be taking place next week at the Media Lab at MIT, which is a gorgeous venue. I will be delivering the paper: Supply Chain Network Design for Critical Needs with Outsourcing, which is joint work with Dr. Patrick Qiang and my doctoral student, Min Yu.

The abstract of the paper is below:

Abstract: In this paper we consider the design of supply chain networks in the case of critical needs as may occur, for example, in disasters, emergencies, pending epidemics, and attacks affecting national security. By "critical needs" we mean products that are essential to the survival of the population, which can include, for example, vaccines, medicine, food, water, etc., depending upon the particular application. "Critical" implies that the demand for the product should be met as nearly as possible since otherwise there may be additional loss of life.

The model that we develop captures a single organization, such as the government or a major health organization or corporation that seeks to "produce" the product at several possible manufacturing plants, have it stored, if need be, and distributed to the demand points. We assume that the organization is aware of the total costs associated with the various operational supply chain network activities, knows the existing capacities of the links, and is interested in identifying the additional capacity outlays, the production amounts, and shipment values so that the demand is satisfied with associated penalties if the demand is not met (as well as penalties with oversupply, which are expected to be lower). In addition, the organization has the option of outsourcing the production/storage/delivery of the critical product at a fixed/negotiated price and with the capacities of those entities being fixed and known. The solution of the model provides the optimal capacity enhancements and volumes of product flows so as to minimize the total cost, which we assume to be a generalized cost, and can include time, subject to the demands being satisfied, as nearly as possible, under demand uncertainty.

To Outsource or to Do It Yourself and Boeing

Sunday's NY Times had a terrific article, A Dream Interrupted at Boeing, that highlighted what went wrong in the design and production of Boeing's 787 Dreamliner airplanes, which are two years behind schedule. Specifically, it analyzed how Boeing's missteps in outsourcing have taken a huge toll. The CEO, W. James McNerney Jr., is even recognizing that Boeing lost control of its production of the Dreamliner by outsourcing more design and production work than previously and not monitoring closely its suppliers. The Dreamliner's novel design lies in its use of plastics reinforced with composites for half of its structure. The composites of carbon fiber are both lighter and stronger than aluminum and, hence, will allow the planes, once operational, to fly further and to significantly reduce fuel costs.

However, there are now new stresses identified where the wings join the fuselage. Also, the outsourcing partners agreed to "share the risk" and to share in the Boeing profits but not when they delivered the parts to Boeing but, rather, when the planes were actually delivered to the airlines (now years behind schedule). Certain suppliers are demanding that Boeing now pay them in advance since they are angry about the delivery delays, understandably.

The article concludes that Boeing still believes in its model of teaming up with partners that share in the risks, but it intends to retain a greater share of the engineering on future projects and to monitor its partners' work more closely. There are, nevertheless, potential positives -- if the technology works, given that the only possible competitor is Airbus, the 850 advance orders for the Dreamliner at $125 million each could bode well for Boeing.

There is much to be learned in terms of supply chain management from Boeing's experiences. Indeed, our group at the Virtual Center for Supernetworks has been conducting studies on mergers and acquisitions and horizontal integration of supply chains. We are now moving to researching tradeoffs regarding the risks associated with outsourcing and the costs versus the benefits, but from a system-wide perspective. Ultimately, our network models will be able to identify when to outsource and when to "do it yourself." In recessionary times and when quality matters the latter may be the best solution of all.