1:00 - 1:45 When OR is AND

Thomas L. Magnanti, Dean of MIT School of Engineering

1:45- 2:20 Overview of the Operations Research Center

James B. Orlin and John N. Tsitsiklis, Codirectors

B R E A K

2:50- 4:10 Supply Chain Management

Modeling and Optimization of Supply Chains: Opportunities, Experiences and Challenges - Stephen C. Graves, MIT and Sean Willems, Boston University

We will present a modeling framework for optimizing the placement of inventory across a supply chain. We will describe the implementation of the model into software and examples of its application to practice. We discuss our experiences and learnings from our efforts to disseminate this research to practice, and conclude with opportunities and challenges based on these experiences.

Inventory Inaccuracy: Its Causes, Consequences, and Cures – Yua Kang, MIT and Stanley Gershwin, MIT

Inventory management is central in Operations Research. Nearly all the authors of the technical literature, however, make one reasonable-sounding false assumption: inventory managers know exactly what they are storing. In reality, inventory records are only estimates, and often not good estimates. Recent technology promises to make inventory estimates far more accurate. This talk describes inventory inaccuracy and ways to compensate for it.

A Portfolio Approach for Procurement Contracts - David Simchi-Levi, MIT

We focus on the procurement of commodity products, such as electricity, steel, grain, cotton or computer memory, which are typically available from a large number of suppliers each of which offers different contracts at a different price and a different level of flexibility. Despite the non-strategic nature of commodity products, procurement decisions need to take into account inventory risk associated with inventory shortages or unsold products, as well as price risk associated with spot markets. We show how a portfolio approach, that has been applied recently by a number of manufacturing companies, can be used to find the right trade-off between expected profit and risk.

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2:50-4:10 Data Driven Models

Clustering Models to Improve Forecasts in Retail Merchandising - Nitin Patel, MIT and Cytel Software Corp., Mahesh Kumar, MIT, and Rama Ramakrishnan, ProfitLogic, Inc.

Forecasting short-term demand for hundreds of items is a routine activity in retail merchandising. Methods used in practice employ a parametric demand model for each item. Our approach clusters items into homogenous groups and models parameter estimates for each item as following a multivariate normal distribution. We will describe two clustering algorithms based on this approach. We will report on experience with applying these algorithms to several real and simulated data sets.

Mining Customer Quality of Service Measures from Transactional Data - Les D. Servi*

Some data rich systems measure transactional data (what happens when?) but cannot directly measure quality of service indicators (such as customer delay) needed for capacity investment decisions. This talk summarizes an approach to infer QoS measures as well as discusses its actual implementation in the field.

* The author currently works at MIT Lincoln Laboratory. This work was conducted while the author was working at Verizon Laboratories and is based on joint work with Daryl Daley (Australian National University).

Pattern Classification and Machine Learning via Large-Scale Optimization Methods - Robert M. Freund, MIT and Ryan Rifkin, Honda Research Institute USA, Inc.

Pattern classification and machine learning methods are used in a wide variety of settings: to distinguish benign from malignant tumors in cancer diagnosis, or to automatically detect objects in the path of a high-speed vehicle for accident avoidance. In this brief talk we will review the key modeling tools used to develop pattern classification and machine learning algorithms using large-scale optimization methods.

B R E A K

4:40 - 6:00 OR in the Public Sector

Airline Security: A Lost Cause? - Arnold I. Barnett, MIT

Airline security has improved since 9/11, but the overall record is not stellar. Indeed, several anti-terrorist measures that could readily pass cost/benefit tests have actually been abolished since the catastrophe. We discuss recent developments in passenger and luggage-hold screening, and the potential value of passenger profiling systems.

25 Years of Urban Operations Research - Richard C. Larson, MIT

Cities experience the full gamut of OR problems. This talk will review the author's experience doing OR in New York City, in writing the textbook (with Amedeo Odoni) called Urban Operations Research, and in supervising MIT ORC thesis students on urban OR problems. We conclude with an update -- a new book (with Amedeo Odoni) is in the works, the Internet is helping to get the word out thanks to MIT's OpenCourseWare (OCW) initiative, and -- thanks to targeted support from the Lounsbery Foundation -- we are establishing a global on-line community of practitioners and scholars in Urban OR.

Network Economics in an Emerging Economy: The Case Study of India - Vijay Chandru, Indian Institute of Science and PicoPeta Simputers

Wireless telecommunications technologies like GSM, CDMA, WLL (wireless local loop) are having a dramatic impact on the economics of communication, information transfer and markets in countries like India. Close to a 100,000 new telephone connections are wired every day and the per minute cost of telephony (local and long distance) are the lowest in the world. This talk will present an analysis of this data in the context of models of economic growth.

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4:40 - 6:00 Financial Engineering and Revenue Management

The Lifetime Optimizer - Dimitris J. Bertsimas, MIT and Gina Mourtzinou, American Express

We describe an application of robust multiperiod optimization to plan the financial life of an individual or a family. The optimizer is the main engine in American Express financial planning software that American Express recently launched in collaboration with Morningstar to serve the needs of its 11,000 advisors and 2.5 million clients.

Manufacturing Revenue Management: A Negotiation Support System for Make-To-Order Transactions - Jérémie Gallien, Yann Le Tallec and Tor Schoenmeyr, MIT

Our objective is to identify near-optimal dynamic guidelines for the sales negotiation of price, quantity and delivery lead-time terms in make-to-order contracts. We study accordingly the dynamic programming formulation of a related admission control problem, derive a computationally efficient policy using a fluid approximation, and report its performance in numerical experiments. Finally, we discuss the potential implementation of this work into a distributed decision support system.

Revenue Management: Where Have We Been, Where Are We Going? - Barry Smith, Sabre Holdings

Revenue Management is the practice of managing price and availability of products or services with the goal to maximize revenue or profit. Since deregulation of the US domestic airline industry, revenue management has evolved from a fringe to mainstream business function and has contributed billions of dollars in incremental profitability. The concepts and tools are now used across a wide range of industries. We’ll review the origins of revenue management, current practices and future directions.

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4:40 - 6:00 Some Realities of Decision Making

Model-based Rationality - Jeremy F. Shapiro, MIT and Slim Technologies

At the dawn of the information age, von Neumann and Morgenstern posited economic principles of rational decision-making that have evolved over the years in parallel with developments in information technology. Organizational behaviorists have found these principles to be unrealistic as the result of studying how decisions in organizations are actually made in the face of ignorance, ambiguity and conflict. In this talk, we present a new set of principles, called model-based rationality, describing how managers can, should and, ultimately, will exploit data-driven, descriptive and prescriptive models to improve their decision-making.

The Practice of Decision and Risk Analysis - Samuel Bodily, University of Virginia

A review of contemporary practice and challenges in decision analysis and risk management will touch a variety of topics: (i) strategic decision analysis, (ii) structured risk management, (iii) real options and hedging, (iv) approximations of probability distributions, (v) decision trees and influence diagrams, (vi) spreadsheet decision modeling and risk analysis simulation, and (vii) decisions involving multiple attributes related to time and stakeholder outcomes.

Human Health Risks of Animal Antibiotics - Louis Anthony (Tony) Cox, Jr., Cox Associates and NetAdvantage, Inc.

Food safety regulators worldwide fear that antibiotics used in food animals select for antibiotic-resistant bacteria that infect people and cause excess illness-days and fatalities as human antibiotic treatments fail. Europe has already banned key animal antibiotics. Yet, quantitative data and OR modeling show that these feared risks are tiny compared to the risks from not using animal antibiotics to prevent bacterial diseases. We consider how to regulate animal antibiotics more rationally to protect human health.