Essays in Empirical Operations Management: Bayesian Learning of Service Quality and Structural Estimation of Complementary Product Pricing and Inventory Management

This dissertation contributes to the rapidly growing empirical research area in the field of operations management. It contains two essays, tackling two different sets of operations management questions which are motivated by and built on field data sets from two very different industries --- air cargo logistics and retailing.

The first essay, based on the data set obtained from a world leading third-party logistics company, develops a novel and general Bayesian hierarchical learning framework for estimating customers' spillover learning, that is, customers' learning about the quality of a service (or product) from their previous experiences with similar yet not identical services. We then apply our model to the data set to study how customers' experiences from shipping on a particular route affect their future decisions about shipping not only on that route, but also on other routes serviced by the same logistics company. We find that customers indeed borrow experiences from similar but different services to update their quality beliefs that determine future purchase decisions. Also, service quality beliefs have a significant impact on their future purchasing decisions. Moreover, customers are risk averse; they are averse to not only experience variability but also belief uncertainty (i.e., customer's uncertainty about their beliefs). Finally, belief uncertainty affects customers' utilities more compared to experience variability.

The second essay is based on a data set obtained from a large Chinese supermarket chain, which contains sales as well as both wholesale and retail prices of un-packaged perishable vegetables. Recognizing the special characteristics of this particularly product category, we develop a structural estimation model in a discrete-continuous choice model framework. Building on this framework, we then study an optimization model for joint pricing and inventory management strategies of multiple products, which aims at improving the company's profit from direct sales and at the same time reducing food waste and thus improving social welfare.

Collectively, the studies in this dissertation provide useful modeling ideas, decision tools, insights, and guidance for firms to utilize vast sales and operations data to devise more effective business strategies.

Improving supply chain performance: Real-time demand information and flexible deliveries

In some supply chains, materials are ordered periodically according to local information. This paper investigates how to improve the performance of such a supply chain. Specifically, we consider a serial inventory system in which each stage implements a local reorder interval policy; i.e., each stage orders up to a local basestock level according to a fixed-interval schedule. A fixed cost is incurred for placing an order. Two improvement strategies are considered: (1) expanding the information flow by acquiring real-time demand information and (2) accelerating the material flow via flexible deliveries. The first strategy leads to a reorder interval policy with full information; the second strategy leads to a reorder point policy with local information. Both policies have been studied in the literature. Thus, to assess the benefit of these strategies, we analyze the local reorder interval policy. We develop a bottom-up recursion to evaluate the system cost and provide a method to obtain the optimal policy. A numerical study shows the following: Increasing the flexibility of deliveries lowers costs more than does expanding information flow; the fixed order costs and the system lead times are key drivers that determine the effectiveness of these improvement strategies. In addition, we find that using optimal batch sizes in the reorder point policy and demand rate to infer reorder intervals may lead to significant cost inefficiency. © 2010 INFORMS.

Active Surface Deformation Technology for Management of Marine Biofouling

Biofouling, the accumulation of biomolecules, cells, organisms and their deposits on submerged and implanted surfaces, is a ubiquitous problem across various human endeavors including maritime operations, medicine, food industries and biotechnology. Since several decades, there have been substantial research efforts towards developing various types of antifouling and fouling release approaches to control bioaccumulation on man-made surfaces. In this work we hypothesized, investigated and developed dynamic change of the surface area and topology of elastomers as a general approach for biofouling management. Further, we combined dynamic surface deformation of elastomers with other existing antifouling and fouling-release approaches to develop multifunctional, pro-active biofouling control strategies.

This research work was focused on developing fundamental, new and environment-friendly approaches for biofouling management with emphasis on marine model systems and applications, but which also provided fundamental insights into the control of infectious biofilms on biomedical devices. We used different methods (mechanical stretching, electrical-actuation and pneumatic-actuation) to generate dynamic deformation of elastomer surfaces. Our initial studies showed that dynamic surface deformation methods are effective in detaching laboratory grown bacterial biofilms and barnacles. Further systematic studies revealed that a threshold critical surface strain is required to debond a biofilm from the surface, and this critical strain is dependent on the biofilm mechanical properties including adhesion energy, thickness and modulus. To test the dynamic surface deformation approach in natural environment, we conducted field studies (at Beaufort, NC) in natural seawater using pneumatic-actuation of silicone elastomer. The field studies also confirmed that a critical substrate strain is needed to detach natural biofilm accumulated in seawater. Additionally, the results from the field studies suggested that substrate modulus also affect the critical strain needed to debond biofilms. To sum up, both the laboratory and the field studies proved that dynamic surface deformation approach can effectively detach various biofilms and barnacles, and therefore offers a non-toxic and environmental friendly approach for biofouling management.

Deformable elastomer systems used in our studies are easy to fabricate and can be used as complementary approach for existing commercial strategies for biofouling control. To this end, we aimed towards developed proactive multifunctional surfaces and proposed two different approaches: (i) modification of elastomers with antifouling polymers to produce multifunctional, and (ii) incorporation of silicone-oil additives into the elastomer to enhance fouling-release performance.

In approach (i), we modified poly(vinylmethylsiloxane) elastomer surfaces with zwitterionic polymers using thiol-ene click chemistry and controlled free radical polymerization. These surfaces exhibited both fouling resistance and triggered fouling-release functionalities. The zwitterionic polymers exhibited fouling resistance over short-term (∼hours) exposure to bacteria and barnacle cyprids. The biofilms that eventually accumulated over prolonged-exposure (∼days) were easily detached by applying mechanical strain to the elastomer substrate. In approach (ii), we incorporated silicone-oil additives in deformable elastomer and studied synergistic effect of silicone-oils and surface strain on barnacle detachment. We hypothesized that incorporation of silicone-oil additive reduces the amount of surface strain needed to detach barnacles. Our experimental results supported the above hypothesis and suggested that surface-action of silicone-oils plays a major role in decreasing the strain needed to detach barnacles. Further, we also examined the effect of change in substrate modulus and showed that stiffer substrates require lower amount of strain to detach barnacles.

In summary, this study shows that (1) dynamic surface deformation can be used as an effective, environmental friendly approach for biofouling control (2) stretchable elastomer surfaces modified with anti-fouling polymers provides a pro-active, dual-mode approach for biofouling control, and (3) incorporation of silicone-oils additives into stretchable elastomers improves the fouling-release performance of dynamic surface deformation technology. Dynamic surface deformation by itself and as a supplementary approach can be utilized biofouling management in biomedical, industrial and marine applications.