Strategic MS/OR News from    Volume 1, Number 2, August, 2000

Strategic Management Science, Incorporated
    visit us at StrategicManagementScience.COM

***

In this issue:

Simulation model sparks interest of UK electricity market regulator
Philips uses NLP to create long-term advantage in manufacture of 30 million picture tubes annually
FTC fines place inventory management on strategic agenda for Internet retailers
Webvan challenges promote need for MS/OR early and often

Purdue University offering to benchmark your call center online
New strategic alliance involves MS/OR firms
Business-to-business demand chain emerging as a strategic MS/OR application
New book on Airport Design and Operation
Data mining applications can provide a competitive edge, but its a complex world
Virtual reality module now available for popular simulation software WITNESS
Cap Gemini Ernst & Young acquisition and new products

Internet analyst estimates future importance of dynamic pricing
Revenue management reaches major league baseball and professional sports
INFORMS establishes Revenue Management Section
Dynamic e-pricing conference
iDerive, Inc. and Talus Solutions, Inc. to build pricing optimization solution
Airlines said to be looking to revenue management to improve cargo margins
PROS Revenue Management Introduces Energy Revenue Management Software

Executives are bullish on the strategic importance of MS/OR
Need to outsource an MS/OR Consultant? Plan to try MS/OR Consulting to strategic clients?

People News
Worth a visit on the www
IT Humor  

Investment section
Editorial: Help Wanted

Simulation model sparks interest of UK electricity market regulator

When Prime Minister Thatcher privatized the UK electricity market there was an expectation that market forces would drive power costs down.  But generators exercised market power, particularly at peak periods when there was little excess generating capacity, with the result that UK electricity prices actually went up, sometimes by spectacular amounts.  The auction system whereby generators bid to supply power to the grid, was flawed. A review of electricity trading arrangements led to suggestions for changes in the auction market and for the major power generators to divest about 25% of their generating capacity.  The cost of these changes exceeded £500 million, but there was no hard evidence that this would solve the problem.

Derek Bunn and John Bower, from the London Business School decided to build a simulation model of the complete electric-power auction market and use their MS/OR skills to address this strategic issue. The system of 90 plants was simulated for 24 hours/day for 4 years of operations (some 2,140,000 bids) taking into account time-of-day demand variation. In the model, each agent uses naive reinforcement learning to independently bid to supply power for each discrete time unit. The model was built in Excel/VBA.

The results:  contrary to the regulator's expectations, the new form of auction market emerged as less competitive than the one it was designed to replace. The model "produced insights into strategic behavior that have eluded conventional economic and game theoretic analysis".  Bunn/Bower's results have been 

• cited in industry representations to OFGEM, the UK regulator,
• have forced OFGEM to respond with their own real-time trading experiment,
• have been put before the UK Department of Trade and Industry Select Committee on energy, and
• used to test merger proposals in the German electricity market.  

In addition, Bunn/Bower have been requested to present evidence to the UK Competitive Commission, and are looking to apply their methodology to the European cross-border electricity market.

With more and more countries privatizing power markets, this work suggests a bright future for MS/OR in contributing to many similar important strategic decisions.

More information:  OFGEM's second submission to the Competition Committee is at:  http://www.ofgem.gov.uk/public/pub.htm
Authors:  DBunn@London.edu, JBower@London.edu

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Picture tube designers are confronted with the problem of finding settings for a large number of design parameters that affect picture tube performance. At Philips, screen geometry, annealing oven temperature profiles, shadow mask design, and electron gun design are all being optimized using NLP methods developed by Dick Den Hertog (D.denHertog@kub.nl) of Tilburg University and Peter Stehouwer (stehouwer@cqm.nl).

Screen geometry involves optimizing seven parameters with hundreds of stresses and cooling and heating speeds, and a tube weight. The work on this problem started in 1995 and has led to a 50-60% reduction in development time using a system that is now used by non-experts in all Philips' world design centers. The annealing oven has 23 temperature parameters that determine the bonding of the screen components. Optimization started in 1997 and has led to a 50% reduction in stresses in the tube. The five geometry parameters of the shadow mask are optimized to maximize robustness (or "buckling load") leading to an increase of 30% since 1998. Finally, the 14 design parameters of the electron gun (distance between plates, plate thickness) are optimized to minimize spot size (10% improvement) and cathode load leading (20% improvement).

The tools developed over this period are now indispensable to the design engineers, and work is continuing to further enhance the overall 30% design improvement and 50-60% time-to-market reduction.

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The US Federal Trade Commission has settled with seven large internet retailers: CDNow, Federated Department Stores, Toys "R" Us online, KBKids.com, Patriot Computer Corporation, Minidiscnow.com, and Original Honey Baked Ham Co. of Georgia, Inc.. The firms agreed to pay total fines of $1.5 million for delayed shipments of goods during the 1999 holiday season. The retailers promoted their sites extensively by making delivery promises that they did not keep, leading to a rash of consumer complaints. In addition to the fines, the companies agreed to file periodic reports on their compliance with Federal mail-order rules. Several of the companies are reported to have since invested in enhanced inventory management and production control systems.

(Source: Wall Street Journal, July 27, 2000 p. A24)

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Webvan challenges promote need for MS/OR.

Webcan, the online-grocery delivery service is using up its start-up funding (of $805 million) at a heart-stopping rate of $30 million a month.  Webvan's new Atlanta office has seen orders climb to 2,000/day (about double expectations) but logistical issues still need working out.  Webvan set up a "hub-and-spoke" delivery operation from a 300,000 square foot warehouse designed by Bechtel Corporation.  This huge fully automated warehouse cost $35 million and can handle the volume of 18 supermarkets.  Two issues still need work:  inventory control, and how to operate the delivery truck fleet.  Webvan is receiving conflicting stocking advice from different manufacturers, and the computerized truck routings are running into clogged roads, unmapped subdivisions, and lost drivers. The lesson:  on-line firms delivering goods need to follow FedEx and UPS's example -- get OR involved early and often.

It is reported that Webvan's Atlanta operation needs 4,000 orders/day averaging $103 each to break even.  In its home turf, the Bay Area, Webvan now has 100,000 customers.  (Source  Wall Street Journal, July 31, 2000 p. B1)

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Purdue University offering to benchmark your call center online

Call centers are an area of rapid growth, and their performance including site selection, configuration, and operations/scheduling have been a source of many profitable MS/OR applications.  Purdue University's Center for Customer Driven Quality offers firms the opportunity to benchmark their centers against specific peer groups.  Executive Summary reports are free while other reports (including Peer Group Comparison, Performance Gap Analysis, Service Level Financial Analysis, Performance Matrix, Gap vs Optimal Solution Index, Secondary Data Analysis and a bundled group of all reports) are inexpensive.

All you have to do is fill in a survey and submit it for analysis. The survey can be found at http://www.commweb.com/static/benchmark.html  The survey must be done carefully and correctly. Download a copy in advance, have your "number-cruncher" fill it out, and submit it online (follow the enclosed directions for submitting the data (online or off) to the Purdue Benchmark Team).  Download the survey Purdue Benchmark Survey.

Link to home page: Purdue University Call Center Benchmarking

The International Quality and Productivity Center offers a two-day seminar on:  Monitoring & Quality Programs for Call Centers:  Smart Managing... A Faster Track to Achieving the Right Call Center Results! at several locations during the next three months. 

More details at IQPC.

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New strategic alliance involves IBM and MS/OR firms 

Four firms have announced an alliance to develop and market a comprehensive set of integrated e-business airline applications and services under the "IBM ConnectEdge for Airlines" banner.   IBM, Siebel Systems, Mercury and Intentia have formed a strategic alliance to attempt to create e-tickets that can be transferred from one airline to another, conduct Internet seat auctions, enhance customer service, maintain their aircraft, and match pilots, flight attendants and aircraft with a particular route.

This new partnership plans a  flexible, streamlined, approach to meeting the e-business needs and IT challenges of the world's airlines, which spend over $10 billion a year on IT. The goals of the alliance are to address airlines' needs to embrace e-business, boost their customer service and improve operational efficiency.  

IBM plans to announce further alliance agreements with additional Business Partners in areas such as revenue management and revenue accounting, e-commerce and airline operations.  The objective is to ensure that a full range of business applications will be available through the ConnectEdge family of solutions.

Intentia International of Stockholm, Sweden (www.intentia.com) sell the Movex Aviation solution that maximises airlines' fleet utilization by improving maintenance, repair and overhaul performance; and optimizes the supply chain network, aircraft downtime, and materials management.

Mercury Systems of Vancouver, Canada (www.mercury.bc.ca) sells Magellan, a DSS that helps crew controllers make better realtime decisions, and facilitates the efficient planning of flight crews in the often dynamic operations environment.

For more information visit www.ibm.com/industries/travel/ConnectEdge.

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Business-to-business demand chain, the process of marketing, selling and supporting products through distribution channels, is emerging as a strategic MS/OR application

The "demand chain" may be less familiar to MS/OR people than the supply chain although in many ways it is more "strategic".  Generating sales through an integrated approach that enables customers to market, sell, and support their products via the Web across all their distribution channels captures senior management attention.  Many issues within the demand chain lend themselves to MS/OR including increasing revenues, improve channel effectiveness, marketing media selection and monitoring, sales force management, and building customer loyalty through customization and market segmentation. 

To review the state-of-the-art, take a look at Asera, Inc.'s announcement of a partnership with Interwoven (a provider of enterprise-class content management software) and MarketSoft (a provider of eMarketing solutions) to add content management and lead management to Asera's Integrated Demand Chain Solution for B2B demand chains.

Warren Weiss, president and CEO of Asera says: "By adding best-in-class sales and marketing functionality from Interwoven and MarketSoft, customers can now manage the entire sales lifecycle from publishing collateral and managing incoming leads to selling online, managing orders, and supporting products through the community."

ELeads from MarketSoft will provide Asera customers with a full set of lead-management components that work together with a company's existing Sales Force Automation, ERP, and/or campaign management software. eLeads automatically captures leads from multiple sources, such as the Web, email, call centers, and tradeshows, and routes those leads to multiple destinations, including direct and indirect sales, channel partners, and business partners. eLeads enables the exact measurement of specific campaigns and performance of individual channel partners. 

Interwoven: www.interwoven.com.  MarketSoft: http://www.marketsoft.com/.
Asera, Inc. (including press release on alliance):  http://www.asera.com.

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New book on Airport Design and Operation

Traditionally airport design and airport operation have been treated separately, yet they are closely related and influence each other.  The aim of this book is to present a new and integrated approach to the two.

The authors are Dr Antonín Kazda,, a civil engineer and aviation specialist with academic, commercial and governmental experience and Dr Robert Caves, European Editor of the Journal of Air Transport Management and primary author of the book Strategic Airport Planning. Together they have experience of over 280 airport studies.

Engineers and managers involved in airport design and operation should benefit from this book which includes both strategic issues (airport planning and development, site selection, runway, clearway, apron and taxiway design, terminal design and people movers) and operations issues (groundhandling methods, refuelling, lights, power supply, winter operations, emergency services, security, demand forecasting).  

More, including a full table of contents at: http://www.elsevier.nl/inca/publications/store/6/2/1/2/4/9/

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Data mining applications can provide a competitive edge, but its a complex world

Data mining has attracted the attention of decision makers sold on techniques to improve performance and reduce costs by discovering hitherto hidden relationships in corporate data. For example, a company could adjust its marketing strategy according to correlations between purchasing choices and demographics. There are literally hundreds of data mining tools and vendors that offer different levels of functionality and features.  If you are interested in learning more:

Database Associates' "Evaluating and Selecting Data Mining Tools" (http://www.dbaint.com/pdf/v11n21.pdf)  offers a methodology for selecting tools, and the Data Warehousing Information Center (at http://www.dwinfocenter.org/datamine.html) includes a detailed list of data mining products and vendors.

There is a large choice of tools available.  Data Warehousing Information Center's checklist can help you to understand the features required to maximize the benefits of data mining for you.

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Virtual reality module now available for popular simulation software WITNESS 

Lanner released WITNESS 2000 on July 5^th.  The new version of this very popular visual simulation software includes some significant enhancements including a virtual reality module, Excel and database access improvements, and an e-mail capability.  (More at www.Lanner.co.uk).

2000 WITNESS Simulation Users Association (WSUA) Conference will be held September 13-14, 2000 Marriott Eagle Crest Resort, Ypsilanti, Michigan  Details

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Cap Gemini Ernst & Young acquisition and new products

Cap Gemini shareholders have approved the terms of the Ernst & Young Consulting acquisition and the issue of 42.7 million new shares in compensation for the contributed businesses, together with a cash consideration of 375 million Euros.  The new Group had 1999 pro forma revenues of 7.7 billion Euros with a combined workforce of 57,000 with broad geographic coverage (37% of turnover in North America and 59% in Europe) and expertise in telecommunications, financial services, life sciences and e-business.

Cap Gemini Ernst & Young has introduced its next generation of e-business enterprise solutions and services.  The new Windows 2000-based services and solutions portfolio will initially focus on two specific areas:  a range of knowledge management solutions will focus on the design, development and implementation of enterprise-wide knowledge sharing, while ‘Infomediary-in-a-Box’ will utilize Windows 2000 as the basis for the development and implementation of business-to-consumer e-commerce systems – providing customers with online product comparison and information and guidance towards a best-fit solution.

Enterprise-wide knowledge sharing is designed to enable business-to-employee personalized information sharing. It is structured to offer direct benefits to senior business managers and decision makers by putting access to key performance parameters at their fingertips.  Currently six templates are available covering needs defined as Executive (for scorecards etc), Functional (e.g. project management), Analysis (e.g. marketing), Relationships (e.g. corporate communications), Innovation (e.g. R&D) and Process (e.g. industrial control). The templates provide a common user interface and draw on tools and information sources including business intelligence and OLAP (Online Analytical Processing), customer information, document management, collaboration, and real-time and operational data.

Infomediary-in-a-Box allows customers to specify their individual situation and responds with tailored information ‘in-a-box’ on the services and products available, together with a recommendation for a best-fit solution. The range of content can be extended by the provider to include data on third party or competitor products and defined by either country or currency zone.  In the financial services sector, Infomediary-in-a-Box has been applied by institutions to tailor products to the customer based on ‘life themes’ including purchasing a first property, early retirement and financing children through university. In addition to providing a product or service recommendation suited to the customer’s individual circumstances at each stage, Infomediary-equipped web sites can suggest complementary combinations of associated financial services, personal account and mortgage equity information. The aim is to  provide a valuable financial advice resource which enhances customer relations and increases the opportunities for cross and deep selling.

“In the same way that a PC manufacturer should build the device around your lifestyle, the motor manufacturer should build the vehicle around the individual,” said Reinoud Karssenberg, senior consultant for Cap Gemini Ernst & Young. “This doesn’t just apply to choices about the basic model of a car, or its color and luxury features. Manufacturers should also tell you how to finance the deal, and provide you with an online history of your car so that you are automatically reminded when the next service is due.”

More at www.capgemini.com.

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Internet analyst estimates importance of dynamic pricing

According to Vernon Keenan of Keenan Vision Inc., based in San Francisco, $1.66 trillion in goods and services will be traded with dynamic pricing through US Internet exchanges in 2004, which represents 63 percent of all online transactions and 14.3 percent of the U.S. gross domestic product. (Quoted in  press release at: http://www.themoment.com/about/07162000.htm)

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Reverse revenue management tools attempt to level the playing field for major travel purchasers

New software products and services that give buyers an opportunity to model their air programs and identify cost saving opportunities prior to negotiations with airlines are appearing in the marketplace. These systems attempt to counteract the airlines' revenue management systems and arm travel managers with a new tool in negotiating with carriers.

At least two new products, Tango from Travel Analytics and Air Program Manager from Travel Procurement Solutions, have been in beta tests and now are on the verge of public rollouts, while industry insiders suspect others are on the way.

 "You'll see more products like this coming to market because the need is immediate and benefits are clear," said Travel Procurement Solutions' vice president of marketing Chris Miller. "They will have a profound impact on the way travel is managed and offer an enormous potential for cost savings."

George Odom, manager of travel and corporate meeting services for Eli Lilly in Indianapolis suggests that more knowledgeable and prepared buyers mean more meaningful partnerships with vendors. "With this type of technology available, you can move away from an adversarial relationship with your suppliers and toward a working relationship," he said. "You both have the data, so there is no sense of mistrust."

Tango, from Travel Analytics, is expected to be available on the desktop by the first of the year. The company said that the product can "provide enough negotiating power to result in savings of 5 percent or more on a company's total air spend." Tango calculates market share for city pairs, tests assumptions and builds multiple scenarios.  (More information on the method is at http://www.travelanalytics.com/ and follow Tango link). 

Travel Analytics claims Tango can trim several weeks off contract negotiations. The product's site (www.travelanalytics.com) advertises the outsource service for $12,500, which analyzes 200 city pairs.  Additional city pairs are priced at $55 each. The desktop version, when available, will be priced at $18,500.  Travel Analytics also hopes to make some sales to airlines, on the theory that it will help the airlines to bid more effectively on corporate accounts.

Air Program Manager, available through Travel Procurement Solutions, is set to begin with three beta test customers at the end of the year.  According to Barry Rogers, senior vice president: "The processing we do in running scenarios produces a massive amount of data."  "We provide advanced decision support capability, but that must be combined with the travel manager's in-depth knowledge." 

Vice President Chris Miller said. "The greatest mistake is to assume that this sort of analysis is simple."

Some travel agencies also offer similar products. Rosenbluth pioneered the concept six years ago with Dacoda, which now has 35 clients totaling $2 billion in air sales.  "You want to be a price maker, not a price taker, and to do that, you need information and tools," said Danamichele O'Brien, Rosenbluth's chief travel scientist.  Examples:

Merck & Co. uses Dacoda  to model 70 percent of its total air spend. Last year, the company saved 10 to 15 percent off its overall air expenditures of $72 million.

Beverly Enterprises, a healthcare service provider slashed about 8 percent from its annual air spend of $8 million using Dacoda.

Speculation swirling regarding a potential patent infringement of Dacoda by Tango was addressed by Scott Gillespie, principal at Travel Analytics who said such allegations are unsubstantiated. "My understanding of Dacoda is that it's a linear optimization program and nothing in our approach or software uses any of that," he said.

"For the airlines, yield management is their pride and joy, and their lifeblood," O'Brien said. "And we have a product out there saving clients a heck of a lot money."

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Ticketmaster Online-Citysearch, Seattle Mariners and @TheMoment partner to incorporate "dynamic pricing" into select online ticket sales for Mariners games

Available today at www.Mariners.Citysearch.com, the dynamic pricing pilot will allow for real-time pricing of tickets, with fan-demand setting the selling price.

"Other industries have found effective ways to use dynamic pricing and this pilot will help us determine if it can work for the ticket buying public," said Bob Aylward, Seattle Mariners Executive Vice President of Business Operations.

John Pleasants, President and CEO of Ticketmaster Online-Citysearch, said: "The live trading supported by dynamic pricing adds a heightened level of interactivity and excitement to online transactions. Consumers help drive pricing, with the level of demand giving them bargaining power to set the price for their tickets."

"Using Internet dynamic pricing to sell perishable products like baseball tickets brings more people into the park, maximizes revenues for club owners, and gives ticket distributors a new and exciting way to promote sales" said Vernon Keenan, Internet analyst at Keenan Vision Inc., based in San Francisco.

To purchase tickets, Seattle Mariners fans go to http://www.Mariners.Citysearch.com where they can view the available games, seating sections and the trading market. Specifically, fans will have the option to purchase two types of tickets for three designated games. When fans decide that they'd like to place a bid or order at the going market price they create a profile, submit their bid or order, and view the bidding status at any time. Once the order is complete, an email is sent to confirm the transaction.

The Seattle Mariners play in the American League West Division of Major League Baseball at SAFECO Field, a retractable roof ballpark located on the edge of downtown Seattle with a capacity of 47,116.

@The Moment, Inc. http://www.themoment.com/
Seattle Mariners: http://www.Mariners.Citysearch.com/
CitySearch: http://www.citysearch.com/
The full press release is at: http://www.themoment.com/about/07162000.htm

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INFORMS establishes Revenue Management Section

The RM section goal is to advance the research and practice of RM and dynamic pricing. The section has 6 corporate sponsors and has assembled a cluster of over 18 presentations at the upcoming INFORMS meeting in San Antonio.  Session topics range from novel applications of forecasting, optimization, pricing, and bidding, to applications in the airline, sea cargo, restaurant, golf, multi-family housing, gaming, tourism, and natural gas industries. 

See the website http://www.informs.org/subdiv/Section/SectionPages/REV/overview.htm, or contact Andy Boyd, aboyd@prosweb.com , for further information.

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Dynamic ePricing conference
August 14-16, 2000 San Francisco, California

http://www.iqpc.com/cgi-bin/templates/96463525691564941406100004/genevent.html?event=525&topic=

Dynamic e-Pricing: Taking Your Pricing Strategies Online - Your Answer to Internet Profits is being organized by the International Quality and Productivity Center. The objective is to provide a view of how top organizations have enhanced their position to become leading pricing practitioners. This event will provide insight into the essential aspects of developing and executing powerful dynamic pricing strategies in response to today’s feverishly transforming e-business world. At this conference, you will hear case studies from winning organizations such as IBM, Amazon.com, FogDog Sports, and Ford Motor Company, who have taken impressive steps towards employing novel and successful online pricing strategies.

iDerive, Inc. and Talus Solutions, Inc. to build pricing optimization solution

Talus Solutions, Inc. and iDerive, Inc. are cooperating to apply the power of derivative-based pricing models to consumer markets, by develop a pricing and revenue management solution supporting iDerive's online marketplace for consumer goods and services. . iDerive's  Alternative Pricing Mechanism enables consumers to get paid for access to great deals on air travel, consumer electronics, automobiles and hotel stays. Using iDerive, consumers are paid cash up front in exchange for committing to a deal in the near future to be enacted at the suppliers' discretion. iDerive suppliers benefit from better demand forecasting and control over inventory management and pricing by locking consumers into sales of products while retaining the option to sell those products elsewhere at higher prices should demand materialize for them. iDerive plans to apply its unique pricing mechanism across a wide variety of industries.

iDerive's business model allows companies such as airlines, hotels, auto dealers, and consumer electronics manufacturers, to use an options-based pricing model to offer consumers future delivery of goods or services. The objective of the model is to provide customers immediate cash and access to exceptional discounts, while at the same time enabling iDerive's supply partners to better control inventory management and pricing in response to changes in market demand. Talus Solutions is to provide a solution that will allow sellers to determine how many options to offer in order to maximize profitability in the face of an uncertain market. With this new software, suppliers will be able to take advantage of powerful risk-management and profit-maximization techniques, which have long been used in the financial markets to minimize exposure to market risk, while providing consumers with access to new kinds of deep discounts.

Mark Nordlicht, founder and CEO of iDerive, Inc. said: "By combining the iDerive selling concept with the Talus Solutions pricing and revenue management solution, sellers will be able to generate more profits and reduce their exposure to risk while buyers will benefit from cash rewards for their flexibility and access to great deals."

"We are excited to work with iDerive on this industry ground-breaking project. iDerive is bringing a tremendously innovative concept to the marketplace and the combination of their technology with ours is a natural one," said Tom Madison, president and chief executive officer of Talus Solutions, Inc.

More at http://www.talussolutions.com/newsroom/pressreleases/press_iderive.html 

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Full article on-line at: http://www.aircargoworld.com/feat/feature1.htm

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PROS Revenue Management Introduces Energy Revenue Management Software

PROS Revenue Management, has announced a new suite of RM software tailored for the energy industry, consisting of transportation RM, storage revenue optimization, and capacity management.

PROSRM claims that these technologies "have been empirically shown to increase revenue by 7-25% and have been licensed by some of the leading U.S. energy companies."  

"In the 1990's energy companies focused on costs. Today's most successful energy companies are refocusing on the top line through the practice of revenue management to maximize profitability," said Bert Winemiller, President and CEO, PROS Revenue Management.

PROS literature states: 

"The transportation RM system maximizes revenue from the transportation of natural gas. By forecasting demand for transportation by market segment, predicting customer utilization of existing contracts, and determining the optimum use of pipeline capacity, the system dynamically determines the value of available pipeline capacity based on current market conditions. With this value identified, the system’s decision-support tools assist transportation marketers in the negotiation of new contracts, in the design and awarding of capacity auctions, and in the optimal discounting of firm and interruptible services. In addition, users benefit by coordinating pricing strategies across business units and measuring performance. 

"The storage RM system maximizes revenue by optimally capturing the price arbitrage opportunities present in the gas futures marketplace within the constraints of the physical hedge. This product can be applied to any pipeline or gas marketing storage or pipeline service that provides customers with the ability to park and loan gas over time. The optimization engine at the heart of the system simultaneously evaluates initial capacity positions, capacity limits, capacity targets, deliverability, and market prices to determine the optimal storage sales plan from a revenue standpoint. Optimal solutions generate additional incremental revenue by identifying the potential for offsetting park and loan deals in the same period that reduce the net physical activity, thus creating “synthetic” inventory

"The capacity management system maximizes revenue by optimally routing gas from supply to market, minimizing transportation and fuel costs while maximizing buy/sell revenue opportunities at pools and interconnects. Almost as important as the profit optimization capability of this tool, is its ability to perform this very complex optimization and generate hundreds of GISB compliant EDI Nominations in seconds. Such an extraordinary increase in scheduling speed can transform the relationship between gas traders and schedulers allowing for multiple trading/scheduling cycles throughout the gas day. Proactive “what-if ?” capabilities allow for different pricing and capacity availability scenarios to be analyzed so that last minute trades can be executed and optimally scheduled up to the nomination deadline."

"The mature revenue optimization technologies that PROS has established continue to enhance our clients profitability as they move into a B2B eCommerce era," said Matt Johnson, Energy Vice President, PROS Revenue Management. "The tools being deployed enable effective Dynamic Pricing, Auctions, Demand Forecasting and Inventory Optimization."

More information at: http://www.prosweb.com/news.asp?page=energy530

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Executives are bullish on the strategic importance of MS/OR

"We are fully confident that OR science will be the science of the 21st century"  Zsigmond Jarai, Minister of Finance, Hungary

"Make no mistake:  the bull is charging!  And Merrill Lynch's Management Science Group helped point it in the write direction." OR/MS Today article "Bullish on Management Science", June 2000 (full article at Bullish on Management Science) 

"OR has the power to radically improve the efficiency of any company's operations.  In the future every company will be OR-enabled, and the winners and the losers will be determined by who figures that out early and who misses the boat.  We intend to be one of the winners." James Crowe, CEO Level 3 cited in OR/MS Today article "Something to Crowe about", June 2000 (full article at Something to Crowe About)

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Need to outsource an MS/OR Consultant?
Plan to try MS/OR Consulting to strategic clients?
 

As MS/OR and its interface with IT become more complex and significant for business processes, many organizations will find it increasingly necessary to outsource MS/OR to help them meet their business objectives.  If you plan to hire or be hired, you should understand the criteria and process firms are advised to follow when hiring outside IT help.  Firms are told that ignoring the approach specified below will result in the potential loss of thousands of dollars and immense amounts of valuable time. 

Here is a typical action plan (from The Info-Tech Research Group at
http://www.technologynews.net)

"Choosing a Consultant Action Plan:

1. Define the nature, scope and objectives of the proposed assignment and establish the selection criteria for prospective consultants with your IT staff and management.
2. Invite various consultants to submit their qualifications and then attend a preliminary meeting to discuss the assignment. Use this forum to generate a shortlist of three/four prospective consultants.
3. Invite your shortlist of consultants to summit a proposal. To encourage creative and original responses from consultants, avoid over-specifying the method of work, but be sure to provide mandatory requirements arising from your company-wide standards. 

Be sure to ask each consultant to provide the following:

How they will undertake the assignment
Names and experience of the staff that will work on the assignment. Even if you engage a large firm, be sure to evaluate every consultant on the team independently
A list of suitable references. Be sure that the work done for them is similar to the work you want done. Don't compare apples to oranges
A draft work program and timetable with an estimate of the fees and other chargeable expenses that will be incurred by your company. Be sure to discuss payment structure
Have them describe their client liaison and management procedures
An outline of their preferred terms of business (be sure they correlate with yours).

Evaluate these things against your already established selection criteria, and above all, STAY OBJECTIVE. Don't, under any circumstances, be swayed by a fancy sales pitch or big name.

Bottom Line: Do the research on prospective consultants now to avoid tears in the future.

Remember: Selecting your consultant is only stage one. You still have to prepare the ground for your chosen consultant before they start work. This includes considering who will manage your consultant and be in charge of progress reporting."  

Firms are told that ignoring this approach will result in the potential loss of thousands of dollars and immense amounts of valuable time.

Sources for more: CSSA's "Working Successfully with IT Consultants" at http://www.cssa.co.uk/home/pubs/briefing/consult.htm.  PlanetIT's "Nine Steps to Working With Consultants" at http://www.planetit.com/techcenters/docs/services/features/PIT20000712S0059?printDoc1. Turbonet's "Choosing a Consultant" at http://www.turbonet.net/guide/step3.html.  

Harlan Crowder's slightly old (1997) but still very relevant article "Seven helpful hints for OR/MS Consultants" is on the www at: http://www.lionheartpub.com/orms/orms-2-97/hints.html

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People News  

Elise del Rosario, senior Vice President of San Miguel Corporation and Manager of the OR Group a has taken early retirement after a highly successful career that included San Miguel winning the ORSA prize for its OR activities..  Elise has set up a small company to perform OR studies for the Philippine Government.  She can be reached at: e.delrosario@pacific.net.ph

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Worth a visit on the www

Optimize The Enterprise: Now that we've got the computing power, optimization is stepping in to give us the 'smarts' in Information Week at  http://www.informationweek.com/789/optimize.htm

Everyone from expert algorithm developers to business people who wish to learn more about optimization will find a wealth of data, new connections, resources and a voice at e-optimization.com.

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Investment section

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IT Humor

What do you do with your old PC components?  Check out http://www.mousetrak.com/obsolete.htm for some ideas.

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Editorial section

You are invited to submit an editorial or comments to be included here.   mailto:newsed@strategicmanagementscience.com

Help Wanted

The first issue of Strategic MS/OR News was very well received (thank you!).  The most common feedback was to query whether there was enough material to support a monthly newsletter dedicated to the business of MS/OR from a senior manager's perspective.  We hope that you agree that this issue, to a significant extent, addresses this query -- and we have left out quite a bit of news that we could have included.

Our objective is to develop Strategic MS/OR News into the place to hear about developments in MS/OR of interest to senior managers.  If you have news or find news that we should include, please draw it to our attention at newsed@strategicmanagementscience.com.

We think that Strategic MS/OR News would be of great educational benefit to students in business schools and MS/OR programs.  We have, therefore, set up a very special subscription rate for students. (Details)

Peter C. Bell 
Comments on this editorial:  mailto:PBell@Ivey.uwo.ca

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