Time traps in supply chains: Is optimal still good enough?

Operations Researchers support Supply Chain Management and Supply Chain Planning by developing adequate mathematical optimization models and providing suitable solution procedures. In this paper we discuss what adequate could mean. Therefore, we may ask several questions concerning “optimality” in Supply Chain Planning under causal and temporal uncertainty: What is an optimal solution? When is it optimal? For how long is it optimal? How should the design of a supply chain be changed when conditions and requirements ask for new structures? In particular, we discuss new approaches to Supply Chain Planning in order to give an optimal transformation from an initial solution over multiple periods to a desired one rather than just specifying an optimal snapshot solution. Time and uncertainty are the factors triggering the whole discussion. In particular, several flaws often found when dealing with these factors result in so-called “time traps”. We look at the impact of recent technological developments like the Internet of Things or Industry 4.0 on operational supply chain planning and control, and we show how online optimization can help to cope with real-time challenges. Moreover, we re-coin the concept of risk in the realm of Supply Chain Planning. Here the question is how to measure supply chain specific risks and how to incorporate them “adequately” into mathematical models.     

Solvency II,regulatory capital,and optimal reinsurance: How good are Conditional Value-at-Risk and spectral risk measures?

We study the problem of optimal reinsurance as a means of risk management in the regulatory framework of Solvency II under Conditional Value-at-Risk and, as its natural extension, spectral risk measures. First, we show that stop-loss reinsurance is optimal under both Conditional Value-at-Risk and spectral risk measures. Spectral risk measures thus constitute a more general class of suitable regulatory risk measures than specific Conditional Value-at-Risk. At the same time, the established type of stop-loss reinsurance can be maintained as the optimal risk management strategy that minimizes regulatory capital. Second, we derive the optimal deductibles for stop-loss reinsurance. We show that under Conditional Value-at-Risk, the optimal deductible tends towards restrictive and counter-intuitive corner solutions or “plunging”, which is a serious objection against its use in regulatory risk management. By means of the broader class of spectral risk measures, we are able to overcome this shortcoming as optimal deductibles are now interior solutions. Especially, the recently discussed power spectral risk measures and the Wang risk measure are shown to avoid any plunging. They yield a one-to-one correspondence between the risk parameter and the optimal deductible and, thus, provide economically plausible risk management strategies.     

An optimal investment,consumption, leisure,and voluntary retirement problem with Cobb–Douglas utility: Dynamic programming approaches

We consider an optimal consumption, leisure, investment, and voluntary retirement problem for an agent with a Cobb–Douglas utility function. Using dynamic programming, we derive closed form solutions for the value function and optimal strategies for consumption, leisure, investment, and retirement.     

Un-diversifying during crises: Is it a good idea?

Computational Management Science - High levels of correlation among financial assets and extreme losses are typical during crises. In such situations, investing in few assets might be a better...     

Bonus or flat wage? An experiment into the principal-agent problem

We conduct a simple principal-agent experiment in order to find the effects of information asymmetry on compensation. Our aim is the analysis of the appropriate compensation and its impact on employee’s effort. Furthermore we want to compare the offered compensation and the supplied effort in the version without communication and we want to know whether the experimental observations are consistent with the theoretical considerations.The experimenters found out that compensations observed during the experiment were different from those suggested by the theory and although they were theoretically not enough to induce high effort, we could observe high performance supplied by the agents.     

An integrated framework for inventory management and transportation of refined petroleum products: Pipeline or marine?

We study the integrated problem of managing inventory of refined petroleum products, and their multi-modal (ships and pipeline) transportation between a refinery and the served distribution centers. It is important that the transportation decisions are driven not just by the inventory levels and customer demand, but also the environmental risks associated with different refined products. A bi-objective mixed integer linear programming optimization model (MILP) is proposed, where constituent components were independently developed and then interfaced to capture the complexity of the resulting integrated model. A time-based decomposition heuristic is also employed to solve the integrated problem. The proposed framework was used to study a number of problem instances generated using a realistic infrastructure in the United States, and the resulting analyses lead to the following inferences: pipeline is the preferred mode of transportation only when cost is the sole consideration; on the other hand, when environmental risks are considered marine is the preferred mode for most of the refined petroleum products, except for heavier oils; and, the proportion of traffic on the two modes is a function of the type and volume of products, and the number of vessels available at the start of the planning horizon.     

Is nature quantum non-local,complex holistic,or what?: II — Applications

In Part I of this paper [A. Sengupta, Is nature quantum non-local, complex holistic, or what? I–Theory & analysis. Nonlinear Anal.: RWA (2009) (in press)] to be referenced “I-”, we examined the linear–nonlinear divide of the natural world in an attempt to seek a rationale for the question “Is nature interactively nonlinear and holistic, or is it additively linear and reductionist?”: Is Nature governed by entanglements of linear superposition or does it represent the nonlinear holism of emergence, self-organization, and complexity? This second part carries the debate forward to propose that Quantum Mechanics is an effective linear representation of a fully chaotic, maximally illposed, multifunctional negworld that obviously is not just a mirror image of the functional real world we inhabit: in fact we argue that nonlinear complex holism represents a stronger form of entanglement than linear quantum non-locality. The bi-directionality of a self-organized, emergent, engine-pump system is analyzed with reference to the role of gravity as the compressive agent responsible for generation and maintenance of structures and life in Nature; we also explore the applicability of chanoxity to the metaphorical resolution of some of the long-standing paradoxes and puzzles in quantum measurement and non-locality, in Prigoginian intrinsic irreversibility, and in some core issues in cosmology and gravitational black holes.Holism is to be seen as complementing mainstream reductionism–linear science has after all stood the test of the last 400 years as quantum mechanics is acknowledgedly one of the most successful yet possibly one of the most mysterious of scientific theories: the success lies in its capacity to classify and predict the physical world, the mystery in what this physical world must be like to behave quantum mechanically–providing a unified picture of the dialectics of the evolutionary dynamics of Nature.     

Semimartingale: Itô or not ?

Itô semimartingales are the semimartingales whose characteristics are absolutely continuous with respect to Lebesgue measure. We study the importance of this assumption for statistical inference on a discretely sampled semimartingale in terms of the identifiability of its characteristics, their estimation, and propose tests of the Itô property against the non-Itô alternative when the observed semimartingale is continuous, or discontinuous with finite activity jumps, and under a number of technical assumptions.     

Reducing the debt: is it optimal to outsource an investment?

This paper deals with the problem of outsourcing the debt for a big investment, according two types of contract: either the firm outsources both the investment (and the associated debt) and the exploitation to another firm (for example a private consortium), or the firm supports the debt and the investment but outsources the exploitation. We prove the existence of Stackelberg and Nash equilibria between the firms, for both types of contract. We compare the benefits of these contracts, theoretically and numerically. We conclude with a study of what happens in case of incomplete information, in the sense that the risk aversion coefficient of each partner may be unknown by the other partner.     

Ethics outside,within, or beyond OR models?

Since ethical concerns are calling for more attention within Operational Research, we present three approaches to combine Operational Research models with ethics. Our intention is to clarify the trade-offs faced by the OR community, in particular the tension between the scientific legitimacy of OR models (ethics outside OR models) and the integration of ethics within models (ethics within OR models). Presenting and discussing an approach that combines OR models with the process of OR (ethics beyond OR models), we suggest rigorous ways to express the relation between ethics and OR models. As our work is exploratory, we are trying to avoid a dogmatic attitude and call for further research. We argue that there are interesting avenues for research at the theoretical, methodological and applied levels and that the OR community can contribute to an innovative, constructive and responsible social dialogue about its ethics.