The competition is being held at an INFORMS conference, "Analyzing and Enhancing the Extended Enterprise," which takes place at the Hilton Montreal Bonaventure from May 19 – 21. Information about the conference is online at http://www2.informs.org/Conf/Practice2002 INFORMS is celebrating its 50th anniversary this year.
A synopsis of the top entries follows:
Continental Airlines: "A New Era for Crew Recovery at Continental Airlines." Continental Airlines: Anna C. White, Janet Wejman; CALEB Technologies Corp.: Gang Yu, Michael Arguello, Mark Gao Song, Sandra M. McCowan; The University of Texas at Austin: Gang Yu.
Airlines face schedule disruptions every day due to unexpected events including inclement weather, air traffic control, mechanical problems, and crew unavailability. These disruptions impact the flight schedule and lead to delays and cancellations. As a result, flight crews may not be in position to service their remaining scheduled flights. Airlines must be able to quickly reassign crews to cover open flights and return crews to their original schedules in the most cost-effective manner, while honoring all government regulations, contractual obligations, and business rules. The CrewSolverTM decision support system, developed by CALEB Technologies Corp. for Continental Airlines, uses operations research to generate globally optimal, or near optimal, crew recovery solutions while satisfying multiple complex constraints.
Benefits: Since implementation, the system has dealt successfully with several high profile events such as the December 2000 and March 2001 Nor’easter snowstorms, the June 2001 Houston flood, and most dramatically, the September 11th terrorist attack. Throughout, Continental recovered from each event in record time and generated overall benefits worth tens of millions of dollars.
Mars Incorporated (with IBM): "Combinatorial and Quantity Discount Auctions with Mutual Benefits." Mars, Inc.: Gail Hohner, John Rich, Grant Reid; IBM T.J. Watson Research: Andrew J. Davenport, Jayant R. Kalagnanam, Ho Soo Lee, Chae H. An.
The purchase of raw materials, packaging, and services is a critical enterprise for Mars, Inc. Developing a strategic supply base and enacting cost containment strategies are two important, but divergent goals. Simple auctions neglect the complex business constraints required by strategic sourcing. The Mars-IBM team created a procurement auction web site (http://www.Number1Traders.com) that enables buyers to incorporate iterative auction mechanisms into strategic sourcing negotiations. Outcomes in such auctions must lead to win-win solutions in order to sustain the long-term relationship between procurer and suppliers. There are factors as important or more important than price, e.g. quality. The procurement auction web site supports several alternatives to simple auctions (such as bundled all-or-nothing bids and quantity discounted bids) which help match the needs of the procurer and the capabilities of the supplier across more than just the price dimension. The ability to consider geographic, volume, and quality factors helps both parties.
Benefits: Feedback from participant suppliers has highlighted the benefits of time, efficiency, transparency, and fairness in using the auction web site. Mars, Inc. has gained a powerful tool to help develop and sustain critical relationships with its suppliers.
PSA Peugeot Citroën: "Improving Car Body Production at PSA Peugeot Citroën." PSA Peugeot Citroën: Alain Patchong, Thierry Lemoine, Gilles Kern.
PSA Peugeot Citroën, established through a merger of the two prominent French carmakers Peugeot and Citroën in 1976, is the sixth largest carmaker in the world and second largest in Europe. PSA is on a strong growth trajectory — the fastest growing car company in the world. Production for 2004 is forecast at 3.5 million cars, up from 3.1 million in 2001 and 2.3 million in 1998. There will be 25 new car models launched in 2001-2004. The financials are also very robust with net profits of $1.17 billion in 2000 on sales of $39.78 billion. R&D plays an important role in sustaining PSA’s profitability and growth. The project team performs R&D in support of car-body production.
Benefits: Their new analytic tools, which combine simulation and Markov chain models of series-parallel systems, have significantly improved throughput with minimal capital investment and no compromise in quality, contributing $130 million to the bottom line in 2001 alone.
Rhenania: Dynamic Multi-Level Modeling: Profitable Growth Through Database Marketing-Driven Mail Order Business. RHENANIA: Ralf Elsner; WHU, Koblenz Graduate School of Management: Manfred Krafft, Arnd Huchzermeier.
Rhenania, founded in 1946, is one of the oldest German catalog sales companies marketing de-listed books and CDs via direct mailing of catalogs. Beginning in 1994, Rhenania recorded decreasing total revenues, market share and profits, though the productivity of single mailings increased. A new optimization procedure was developed that dynamically optimizes the timing and intensity of mailings to multiple customer segments and newly acquired customers over a rolling horizon of one-year. Rhenania broke with the industry's tradition of maximizing the productivity of single mailings to loyal customers only. The application of this procedure led to a turnaround for the company. After applying the new approach, Rhenania moved from number 5 to number 2 in its market.
Benefits: By May 1998, the implementation of Dynamic Multi-Level Modeling (DMLM) in Rhenania’s core business resulted in a dramatic 63.2% growth in profit as well as sales growth of 36.2%, far exceeding overall market growth of 14.3% in sales volume. By 1999, operating profits more than quadrupled (+417.7%).
Schindler Elevator Corporation: "GIS-Integrated System for Optimizing Periodic Maintenance Operations." Schindler Elevator Corporation: Fred Blakeley, Joseph Knolmajer; ESRI, Inc.: Burcin Bozkaya; Buyang Cao; Wolfgang Hall.
Schindler Elevator Corporation operates more than 100 offices in Canada and the U.S. over a wide range of service areas, from highly dense areas to territories covering multiple states. In just seven months, ESRI successfully developed and implemented PASS, a planning and scheduling system that uses a geographic information system (GIS) and OR techniques to optimize preventive maintenance services and increase efficiency in technician route planning. The combined GIS and optimization capabilities of the system allows Schindler to restructure and streamline its service areas. The manual route rebuilding process was shortened from several weeks to two hours.
Benefits: PASS is the key Field Service productivity tool used by Schindler superintendents to manage thousands of service technicians performing preventive maintenance for tens of thousands of elevators and escalators. The optimization created by the system provides significant annual savings and the new tools provide detailed reporting through all levels of management including VP of Field Operations and Chief Operating Officer.
Syngenta Seeds: "An Optimization Model for Matching Supply and Demand for Hybrid Seed Corn." Syngenta Seeds, Inc.: Greg Kegler; University of Iowa: Philip C. Jones; Timothy J. Lowe; North Dakota State University: Rodney D. Traub.
Matching supply and demand is particularly challenging in agribusiness, since lead times are often quite long and production processes do not easily lend themselves to process improvements. Syngenta Seeds, Inc., the third largest seed corn producer in the U.S., developed and implemented an optimization model for determining the acreage to be planted in North and South America in order to more accurately meet demand for seed corn. The model is now an integral part of the inventory, forecasting, and production planning processes at Syngenta. In particular it is used extensively for planning the newest hybrids and late life-cycle hybrids, where second period production opportunities become advantageous once forecasted demand becomes more certain.
Benefits: The company estimates that use of the optimization model increased margins by $4 million for the 2001 production year.
The Institute for Operations Research and the Management Sciences (INFORMS®) is an international scientific society with over 10,000 members dedicated to applying scientific methods to aid decision-making, management, and operations. Members of INFORMS work in business, government, and academia. They are represented in fields as diverse as airlines, health care, law enforcement, the military, the stock market, and telecommunications. 2002 is the 50th anniversary of organized operations research in the United States. 1952 was the year that the journal Operations Research and the Operations Research Society of America, one of the founding societies of INFORMS, were born. The INFORMS website is at http://www.informs.org.