Risk Aversion in Inventory Management

Traditional inventory models focus on risk-neutral decision makers, i.e., characterizing replenishment strategies that maximize expected total profit, or equivalently, minimize expected total cost over a planning horizon. In this paper, we propose a framework for incorporating risk aversion in multi-period inventory models as well as multi-period models that coordinate inventory and pricing strategies. In each case, we characterize the optimal policy for various measures of risk that have been commonly used in the finance literature. In particular, we show that the structure of the optimal policy for a decision maker with exponential utility functions is almost identical to the structure of the optimal risk-neutral inventory (and pricing) policies. Computational results demonstrate the importance of this approach not only to risk-averse decision makers, but also to risk-neutral decision makers with limited information on the demand distribution.

Type-omega DPLs

Type-omega DPLs (Denotational Proof Languages) are languages for proof presentation and search that offer strong soundness guarantees. LCF-type systems such as HOL offer similar guarantees, but their soundness relies heavily on static type systems. By contrast, DPLs ensure soundness dynamically, through their evaluation semantics; no type system is necessary. This is possible owing to a novel two-tier syntax that separates deductions from computations, and to the abstraction of assumption bases, which is factored into the semantics of the language and allows for sound evaluation. Every type-omega DPL properly contains a type-alpha DPL, which can be used to present proofs in a lucid and detailed form, exclusively in terms of primitive inference rules. Derived inference rules are expressed as user-defined methods, which are "proof recipes" that take arguments and dynamically perform appropriate deductions. Methods arise naturally via parametric abstraction over type-alpha proofs. In that light, the evaluation of a method call can be viewed as a computation that carries out a type-alpha deduction. The type-alpha proof "unwound" by such a method call is called the "certificate" of the call. Certificates can be checked by exceptionally simple type-alpha interpreters, and thus they are useful whenever we wish to minimize our trusted base. Methods are statically closed over lexical environments, but dynamically scoped over assumption bases. They can take other methods as arguments, they can iterate, and they can branch conditionally. These capabilities, in tandem with the bifurcated syntax of type-omega DPLs and their dynamic assumption-base semantics, allow the user to define methods in a style that is disciplined enough to ensure soundness yet fluid enough to permit succinct and perspicuous expression of arbitrarily sophisticated derived inference rules. We demonstrate every major feature of type-omega DPLs by defining and studying NDL-omega, a higher-order, lexically scoped, call-by-value type-omega DPL for classical zero-order natural deduction---a simple choice that allows us to focus on type-omega syntax and semantics rather than on the subtleties of the underlying logic. We start by illustrating how type-alpha DPLs naturally lead to type-omega DPLs by way of abstraction; present the formal syntax and semantics of NDL-omega; prove several results about it, including soundness; give numerous examples of methods; point out connections to the lambda-phi calculus, a very general framework for type-omega DPLs; introduce a notion of computational and deductive cost; define several instrumented interpreters for computing such costs and for generating certificates; explore the use of type-omega DPLs as general programming languages; show that DPLs do not have to be type-less by formulating a static Hindley-Milner polymorphic type system for NDL-omega; discuss some idiosyncrasies of type-omega DPLs such as the potential divergence of proof checking; and compare type-omega DPLs to other approaches to proof presentation and discovery. Finally, a complete implementation of NDL-omega in SML-NJ is given for users who want to run the examples and experiment with the language.

Reconfigurable Architectures for General-Purpose Computing

General-purpose computing devices allow us to (1) customize computation after fabrication and (2) conserve area by reusing expensive active circuitry for different functions in time. We define RP-space, a restricted domain of the general-purpose architectural space focussed on reconfigurable computing architectures. Two dominant features differentiate reconfigurable from special-purpose architectures and account for most of the area overhead associated with RP devices: (1) instructions which tell the device how to behave, and (2) flexible interconnect which supports task dependent dataflow between operations. We can characterize RP-space by the allocation and structure of these resources and compare the efficiencies of architectural points across broad application characteristics. Conventional FPGAs fall at one extreme end of this space and their efficiency ranges over two orders of magnitude across the space of application characteristics. Understanding RP-space and its consequences allows us to pick the best architecture for a task and to search for more robust design points in the space. Our DPGA, a fine- grained computing device which adds small, on-chip instruction memories to FPGAs is one such design point. For typical logic applications and finite- state machines, a DPGA can implement tasks in one-third the area of a traditional FPGA. TSFPGA, a variant of the DPGA which focuses on heavily time-switched interconnect, achieves circuit densities close to the DPGA, while reducing typical physical mapping times from hours to seconds. Rigid, fabrication-time organization of instruction resources significantly narrows the range of efficiency for conventional architectures. To avoid this performance brittleness, we developed MATRIX, the first architecture to defer the binding of instruction resources until run-time, allowing the application to organize resources according to its needs. Our focus MATRIX design point is based on an array of 8-bit ALU and register-file building blocks interconnected via a byte-wide network. With today's silicon, a single chip MATRIX array can deliver over 10 Gop/s (8-bit ops). On sample image processing tasks, we show that MATRIX yields 10-20x the computational density of conventional processors. Understanding the cost structure of RP-space helps us identify these intermediate architectural points and may provide useful insight more broadly in guiding our continual search for robust and efficient general-purpose computing structures.

The Wrong Kind of Lean: Over-Commitment and Under-Represented Skills on Technology Teams

This paper reports on results from five companies in the aerospace and automotive industries to show that over-commitment of technical professionals and under-representation of key skills on technology development and transition teams seriously impairs team performance. The research finds that 40 percent of the projects studied were inadequately staffed, resulting in weaker team communications and alignment. Most importantly, the weak staffing on these teams is found to be associated with a doubling of project failure rate to reach full production. Those weakly staffed teams that did successfully insert technology into production systems were also much more likely than other teams to have development delays and late engineering changes. The conclusion suggests that the expense of project failure, delay and late engineering changes in these companies must greatly out-weigh the savings gained from reduced staffing costs, and that this problem is likely going to be found in other technology-intensive firms intent on seeing project budgets as a cost to be minimized rather than an investment to be maximized.

Coordinating Inventory Control and Pricing Strategies with Random Demand and Fixed Ordering Cost: The Finite Horizon Case

We analyze a finite horizon, single product, periodic review model in which pricing and production/inventory decisions are made simultaneously. Demands in different periods are random variables that are independent of each other and their distributions depend on the product price. Pricing and ordering decisions are made at the beginning of each period and all shortages are backlogged. Ordering cost includes both a fixed cost and a variable cost proportional to the amount ordered. The objective is to find an inventory policy and a pricing strategy maximizing expected profit over the finite horizon. We show that when the demand model is additive, the profit-to-go functions are k-concave and hence an (s,S,p) policy is optimal. In such a policy, the period inventory is managed based on the classical (s,S) policy and price is determined based on the inventory position at the beginning of each period. For more general demand functions, i.e., multiplicative plus additive functions, we demonstrate that the profit-to-go function is not necessarily k-concave and an (s,S,p) policy is not necessarily optimal. We introduce a new concept, the symmetric k-concave functions and apply it to provide a characterization of the optimal policy.

Coordinating Inventory Control and Pricing Strategies with Random Demand and Fixed Ordering Cost: the Infinite Horizon Case

We analyze an infinite horizon, single product, periodic review model in which pricing and production/inventory decisions are made simultaneously. Demands in different periods are identically distributed random variables that are independent of each other and their distributions depend on the product price. Pricing and ordering decisions are made at the beginning of each period and all shortages are backlogged. Ordering cost includes both a fixed cost and a variable cost proportional to the amount ordered. The objective is to maximize expected discounted, or expected average profit over the infinite planning horizon. We show that a stationary (s,S,p) policy is optimal for both the discounted and average profit models with general demand functions. In such a policy, the period inventory is managed based on the classical (s,S) policy and price is determined based on the inventory position at the beginning of each period.