A new heuristic and an exact approach for a production planning problem

Central European Journal of Operations Research - We deal with a very complex and hard scheduling problem. Two types of products are processed by a heterogeneous resource set, where resources have...     

Partial splitting of longevity and financial risks: The longevity nominal choosing swaptions

The previous attempts to launch liquid and standardized longevity derivatives in the market failed because banks do not seem to be ready to take longevity risk. Therefore, instead of trying to transfer longevity risk to investors, it could be interesting for financial institutions to propose interest rate hedges adapted to longevity portfolios, in the spirit of liability driven investments. In this paper, we introduce a new structured financial product: the so-called Longevity Nominal Chooser Swaption. Thanks to such a contract, insurers could keep pure longevity risk and transfer to financial markets a great part of interest rate risk underlying annuity portfolios.We use a population dynamics longevity model and a classical two-factor interest rate model to price this product. Numerical results show that the option offered to the insurer (in terms of choice of nominal) is not too expensive in many real-world cases. We also discuss the pros and the cons of the product and of our methodology.     

The co-production approach to service: a theoretical background

The paper develops a theoretical background on the co-production approach as an extension of operations management principles, in which co-production function assumes well-defined functional form with the input presence of both firm and customers. The co-production approach not only views a customer as a co-producer, but also conducts strategic trade-offs between a firm and customers in service systems. Moreover, the value and the process of value co-creation are also explored under the co-production approach. The experimental study with a hypothetical service system indicates that the co-production function is feasible under economic and institutional considerations, and the co-production approach generalizes both the firm approach and the customer approach. Furthermore, the co-production approach creates many rich opportunities for future research on service operations management.     

The assignment-to-days problem in a school time-table,a heuristic approach

There is a lot of literature on time-tabling algorithms. In most of them the assumption is made that the weekly school time-table requirements are easily divided into daily requirements. But this is not the case when the school is large and the time-table involves complicated situations like settings and multiple periods. In this study a heuristic algorithm is proposed dealing with the assignment to individual days of the weekly requirements. Five British schools are used for a practical evaluation. Results are discussed and suggestions for further improvements are made.     

The location of protection devices on electrical tree networks: a heuristic approach

The problem of determining the number of protection devices and their locations on an electrical tree network with subtrees dependency is investigated. The aim is to reduce the amount of inconvenience caused to customers that are affected by any given fault on the network. A constructive heuristic and an appropriate implementation of tabu search are proposed and compared against a method currently used by the electrical supply companies. Computational tests are performed on randomly generated electrical tree networks varying in size and branch complexity. Both the proposed methods outperformed the one used in practice. In particular our tabu search implementation was found to produce the best results without taking an excessive amount of computational time.     

The finite-time ruin probability in the presence of Sarmanov dependent financial and insurance risks

Consider a discrete-time insurance risk modelWithin period i, i ≥ 1, Xi and Yi denote the net insurance loss and the stochastic discount factor of an insurer, respectively.Assume that {(Xi, Yi), i ≥ 1} form a sequence of independent and identically distributed random vectors following a common bivariate Sarmanov distributionIn the presence of heavy-tailed net insurance losses, an asymptotic formula is derived for the finite-time ruin probability.     

Strategic financial management in a multinational financial conglomerate: A multiple goal stochastic programming approach

The paper discusses a multi-stage stochastic programming approach to the strategic financial management of a multi-company financial conglomerate. The planning system creates a comprehensive strategy which simultaneously covers a number of future scenarios within a multi-period planning horizon. Multiple conflicting goals may be specified for the group level, company level or individual business area level, and the decision maker’s preferences are allowed to change over time to reflect changing operating conditions and trade-off relationships between the goals. Special features include, among other things, full market valuation throughout the model, integrated treatment of different types of risks, explicit modelling of various types of intra-group transactions and relationships, extensive structures to deal with distressed assets and the covering of losses within the group, as well as consideration of potential portfolio effects of a diversified group structure on the cost of funding.     

A new theoretical approach to sample problems and deductive reasoning in Sanskrit mathematical texts

Geometry is the earliest recorded branch of Indian mathematics. Mathematics of the Vedic period consists of those geometric techniques needed for the construction of the altars and fire-places described by the priestly hereditary class for the performance of their rites. The link between geometry and ritual suggests that mathematical accuracy was considered of the utmost importance in this context. The study of rational figures in the Sanskrit work Ga?ita Sāra Sa?graha, to which Mahāvīrācārya, a ninth-century ce Jaina mathematician, dedicates a special treatment, reveals striking parallelism with the earlier geometry developed in connection with the Vedic sacrifice. Mahāvīra makes extensive use of the udde?aka or ‘sample problem’, and I suggest a new way of interpreting the udde?aka as a significant device for constructing an ‘actual proof’ which validates and links a mathematical rule to its unmentioned premises and provides a system of knowledge based on deductive syllogism.     

Managing risks in information systems outsourcing: An approach to analyzing outsourcing risks and structuring incentive contracts

Information systems outsourcing is now almost standard practice for many companies. Outsourcing the information processing activities is a complex issue that entails considerable implications for the strategy of the firm. An important mechanism for managing the performance of outsourcing vendors is incentive contracts. But to develop an outsourcing contract the IS manager must quantify risks and benefits. However methods and tools for analyzing and quantifying outsourcing risks that IS managers have at their disposal are rudimentary. In this paper we offer a method and some mathematical models for analyzing risks and constructing incentive contracts for IS outsourcing. We are aware that most managers do not like to use mathematical models, consequently we have minimized the technical discussion and have illustrated how this model could be implemented using spreadsheet software for ease of use.     

Assessing financial distress where bankruptcy is not an option: An alternative approach for local municipalities

The goal of this paper is to build an operational model for evaluating the financial viability of local municipalities in Greece. For this purpose, a multicriteria methodology is implemented combining a simulation analysis approach (stochastic multicriteria acceptability analysis) with a disaggregation technique. In particular, an evaluation model is developed on the basis of accrual financial data from 360 Greek municipalities for 2007. A set of customized to the local government context financial ratios is defined that rate municipalities and distinguish those with good financial condition from those experiencing financial problems. The model’s results are analyzed on the 2007 data as well as on a subsample of 100 local governments in 2009. The model succeeded in correctly classifying distressed municipalities according to a benchmark set by the central government in 2010. Such a model and methodology could be particularly useful for performance assessment in the context of several European Union countries that have a similar local government framework to the Greek one and apply accrual accounting techniques.     

The municipal financial planning model: A simultaneous regression equations and goal programming approach

Most of today's city managers are concerned about municipal financial problems. In trying to resolve these problems, scientific planning tools are needed to examine the optimality of resource allocation. For the municipal financial policy planners, the following two points are important.

• 1.(1) Statistical aspects. Since there are many economic variables in municipal financial problems, it is necessary to clarify the relationship among these variables and to infer the parameters through a statistical approach.
• 2.(2) Mathematical aspects. Policy-planners must specify the optimal value of these variables so as to attain the multiple goals of a local government.

Econometric models, especially the simultaneous equations approach, are appropriate for statistical analysis; whereas a goal-programming formulation may be used for mathematical aspects of the problem.In this paper, we propose and show that these two models can be combined. We call this the GPE model.The GPE model is applied to Urawa City. The Urawa model is composed of 6 structural equations 9 variables and 4 scenarios from the standpoint of future insight of Urawa City.From the Urawa Case, we conclude that the GPE model may be a practical tool for the municipal financial planning of other local governments.     

The speed of adjustment of financial ratios: A hierarchical Bayesian approach using mixtures

This paper presents a hierarchical Bayesian analysis of the partial adjustment model of financial ratios using mixture models, an approach that allows us to estimate the distribution of the adjustment coefficients. More particularly, it enables us to analyse speed of reaction in the presence of shocks affecting financial ratios objectives as a basis to establish homogenous groups of firms. The proposed methodology is illustrated by examining a set of ratios for a sample of firms operating in the U.S. manufacturing sector. Copyright © 2007 John Wiley & Sons, Ltd.     

Constructing difference families through an optimization approach: Six new BIBDs

In this paper we formulate the construction of difference families as a combinatorial optimization problem. A tabu search algorithm is used to find an optimal solution to the optimization problem for various instances of difference families. In particular, we construct six new difference families which lead to an equal number of new balanced incomplete block designs with parameters: (49, 98, 18, 9, 3), (61, 122, 20, 10, 3), (46, 92, 20, 10, 4), (45, 90, 22, 11, 5), (85, 255, 24, 8, 2) and (34, 85, 30, 12, 10). © 2000 John Wiley & Sons, Inc. J Combin Designs 8: 261–273, 2000     

Analysing production and environmental risks in arable farming systems: A mathematical approach

In response to a growing environmental concern in Dutch society, sustainable production systems in arable farming have been developed. Amongst other things, a reduction of the dependency on chemical inputs is attempted. This paper addresses the role of risk in the adoption by farmers of new systems by means of a model that determines differences in production risks between conventional and sustainable farming systems (CAFS and IAFS).Timing of activities – setting out a management track – is particularly important in sustainable arable farming systems. Resource requirements of crop husbandry activities mainly depend on weather conditions. To assess risks caused by weather conditions, the major aspects of crop husbandry in various crops have been modelled. Using tactics in crop husbandry (decision rules) and weather uncertainty as input, crop husbandry models (HMs) calculate management tracks that require resources. The value distributions of resource requirements of crop husbandry according to different farming systems is calculated in different HMs represented by stochastic dynamic directed networks. Hence, production risks of CAFS and IAFS can be compared.On a farm, all the aspects of crop husbandry in the various crops are to be taken into account. Given the weather conditions, tactics for all the aspects are combined in an LP model of the whole farm where they compete for limited resources. In the LP model, tactics are re-assessed by means of the HMS, using information of the LP solution. This iterative procedure enables production risks of CAFS and IAFS to be compared, considering fixed, allocatable resources for the whole farm firm.     

The deterministic EOQ with partial backordering: A new approach

Previous authors have shown that if demand that cannot be filled from stock is partially backordered, then using the full-backordering model or assuming that all stockouts will result in lost sales can lead to substantial increases in cost relative to using a model that specifically recognizes the percentage of the stockouts that will be backordered. The models that these authors developed resulted in procedures or equations that are relatively difficult to use. In this paper we take a different approach to modeling the deterministic EOQ with partial backordering that results in equations that are more like the comparable equations for the basic EOQ and its full-backordering extension.     

Consumer choice behaviour and new product development: an integrated market simulation approach

The extremely high costs associated with the commercial failure of a new product, stresses the importance of a model that will effectively forecast the market penetration of a product at the design stage. The purpose of our study is to discover heuristics that will better explain market share, an issue of considerable concern to industry, which also, if successfully pursued, will increase the value of the analytical tools developed for managers. A method easy to implement is presented, which improves the value of market simulations in conjoint analysis. The proposed approach deals with two issues common to traditional market simulations in the context of conjoint analysis applications—the lack of differential impact of attributes across alternatives and the absence of accounting for differential substitution across brands (ie, the Independence from Irrelevant Alternatives problem). We deal with the first issue by ‘tuning’ utilities with individual level exponents, as opposed to a common exponent under the ‘ALPHA’ rule (the current state of the art approach). These exponents derive from the range, skewness and kurtosis of the distribution of utilities that a respondent assigns to various products. While these exponents are individual specific, the effects of the coefficients are assumed to be homogeneous across consumers to preserve model parsimony, while accounting for observed heterogeneity in the data. The second issue is studied in the model via a similarity ‘correction’ for each pair of products. The performance of the approach is validated both on real data from a market survey concerning milk, and on simulated data through the design of a Monte Carlo experiment. The results of the simulation for different market scenarios indicate that the approach appropriately exhibits the theoretical properties that are necessary for the efficient representation of consumer choice behaviour. In addition, the proposed model outperforms the state of the art methodology, as well as some more traditional approaches, with regard to the forecasting accuracy on market shares estimation, both on the real and the simulated data sets. The results obtained have important implications for marketing managers concerning the design of new products. A new concept can be tested before it enters the production stage, using data obtained from a market survey. The high predictive accuracy of the model may assist a firm in minimizing the uncertainty and risks associated with a new product launch. The case study with data from a real market survey, illustrates the practical applicability of the approach.