2011 Edelman Award Presentations

 MISO Unlocks Billions in Savings through the Application of O.R. to Energy and Ancillary Services Markets

Presented by: John Bear, MISO; Richard Doying, MISO; Mingguo Hong, MISO

Abstract: The Midwest Independent Transmission System Operator (MISO) is a nonprofit organization formed through the action of several electric transmission owners. The company operates in 13 states in the Midwest region of the United States and one Canadian province of Manitoba. The MISO transformed the electric utility industry leveraging advances in computing capabilities and using O.R. to create and implement complex algorithms and computer models to introduce centralized wholesale energy markets to the Midwest. These new markets increased the efficiency of the existing electric infrastructure (power plants and high-voltage transmission lines), improved the reliability of the grid and reduced the need for future infrastructure investments in the Midwest. As a result of these advances the MISO region realized between $2.1 billion and $3.0 billion in cumulative savings from 2007 through 2010, with an additional estimated value of $6.1 billion to $8.1 billion through 2020.

Chapter Guide:
Organization Overview: Slide #02
Problem and challenges: Slide #04
Approach and methodology: Slide #19
Results, impact, and conclusion: Slide #45

 CSAV: A Strategic Empty Container Logistics Optimization in a Major Shipping Company

Presented by: Andres Weintraub, University of Chile; Fernando Valenzuela, CSAV; Rafael Epstein, University of Chile; Sergio Hurtado, CSAV

Abstract: Compañía Sud Americana de Vapores (CSAV) is the sixth largest shipping company in the world. CSAV developed a system (ECO), to manage the problem of inventories and imbalances of empty containers, since some regions are net importers of empty containers (e.g. China), while others are net exporters (e.g. Saudi Arabia). A multi-commodity, multi-period model manages the repositioning problem, while an inventory model determines safety stocks required at each location used by the firm to insure high service level despite uncertainties. A hybrid forecasting system was developed to support both the inventory and the network flow model. Major improvements in data gathering, communications in real time, and automation of data handling were needed to feed the models. A collaborative web-based optimization framework allowed agents from different zones to interact in decision making. The use of ECO led to direct savings of $75 million for CSAV, with a reduction in inventory stocks of 50% and an increase in container turnover of 60%.

Chapter Guide:
Organizational overview: Slide #04
Problem and challenges: Slide #16
Solution and methodology: Slide #24
Implementation: Slide #41
Impact and benefits: Slide #49

 System Dynamics Transforms Fluor Corporation Project and Change Management

Presented by: Edward Godlewski, Fluor Corporation; Gregory Lee, Kenneth Cooper Associates

Abstract: Fluor Corporation designs and builds many of the worlds most complex engineering and construction projects. It has implemented a system dynamics model-based system that has improved project management, transformed change management, and brought large quantified business benefits to the company and its clients. The model is rapidly set up for and tailored to each major project. It is then used to foresee future cost and schedule impacts of project changes and to test ways to avoid the impacts. Since 2005, this system has been used on over 100 Fluor projects. Quantitative business benefits exceed $800M to date for Fluor and its clients. Further, it has transformed the mindset of our managers away from the industrys retrospective view, in which disputes can become the channel for resolving cost responsibility, and replaced it with a proactive approach, in which Fluor works with clients to find, in advance, ways to mitigate impacts and reduce costs a win-win for Fluor and its clients.

Chapter Guide:
Organization Overview: Slide #04
Problem and Challenges: Slide #10
Approach and methodology: Slide #17
Results, impact, and conclusion: Slide #37

 Branch Reconfiguration Practice through Operations Research at Industrial and Commercial Bank of China Limited

Presented by: WU, Bin, ICBC New York; GUO, Li Jie, ICBC; XIE, Ming, IBM Research - China; JIANG, Li Ying, ICBC; LIU, Xiao Hu, ICBC; LI, Thomas, IBM Research - China

BR = Branch Reconfiguration - ICBC's customized O.R.-based bank branch network optimization system

Abstract: As the largest publicly traded bank in the world measured by market capitalization, deposit volume and profitability, Industrial and Commercial Bank of China Limited (ICBC) has a vast network of over 16,000 branches. To keep a leading position in the competitive China market, a critical strategic problem for ICBC was the reconfiguration of branch locations and service capabilities to match the regional economy and customer distribution, along with quick identification and relocation to new high potential market areas. Partnering with IBM, ICBC customized an OR based branch network optimization system known as Branch Reconfiguration (BR). So far, BR has been implemented in 40 major cities in China. The increase in deposits attributable to BR in a typical major city like Suzhou was US$1.04 billion. Over time it is expected that ICBC will continue to experience additional deposits. The BR project is a successful example of using OR methods to transform the service channels of a large bank with excellent results.

Chapter Guide:
Organizational overview: Slide #02
Problem and challenges: Slide #06
Approach and O.R. models: Slide #13
Implementation: Slide #31
Impact and conclusion: Slide #33

 Retail Price Optimization at InterContinental Hotels Group (IHG)

Presented by: Craig Eister, InterContinental Hotels Group; Dev Koushik, InterContinental Hotels Group; Jon A. Higbie, Revenue Analytics; Michael Tolbert, Holiday Inn Express

Abstract: InterContinental Hotels Group (IHG) is the worlds largest hotel group by number of rooms. IHGs Revenue Management platform, PERFORMSM with Price Optimization is the first large scale, enterprise implementation of price optimization in the hospitality industry. The Price Optimization module determines optimal room rates based on occupancy, price elasticity and competitive prices. The approach is a major advancement over existing revenue management systems which assume demands by rate segments are independent of each other and of price. The Price Optimization module is currently deployed to 2,077 hotels globally and will eventually be deployed to all IHG properties. A 2.7% increase in revenue has been verified and acknowledged in the IHG 2009 annual review. To date Price Optimization has achieved $145M in incremental revenue for the IHG hotel estate. At full rollout, this capability will generate $300M per year.

PERFORMSM= IHGs yield management system featuring retail price optimization principles.

Chapter Guide:
Organization Overview: Slide #03
Problem and challenges: Slide #14
Approach and methodology: Slide #20
Results, impact, and conclusion: Slide #44

   Tax Collections Optimization for New York State

Presented by: Thomas Mattox, NYS Department of Tax and Finance; Gerard Miller, NYS Department of Tax and Finance; Brenda Dietrich, IBM; Naoki Abe, IBM; Shaun Barry, IBM

C.I.S.S. = Case Identification and Selection System 

Abstract: The New York State Department of Taxation and Finance (NYS DTF) collects over $1 billion annually in assessed delinquent taxes. A novel solution was developed to address the challenge of optimizing tax collection activities, in the presence of complex dependencies between business needs, resources and legal constraints. The solution is a unique combination of data analytics and optimization based on the unifying framework of constrained Markov Decision Processes (C-MDP). The developed system optimizes the collection actions of agents with respect to maximization of long term returns, and generates a customized collections policy that is efficient and adaptive. The system became operational in December 2009, and there has already been an $83M increase in revenue from 2009 to 2010 (8%), using the same set of resources. Given a typical annual increase of 2-4%, the expected benefit of the developed system is approximately $120M to $150M over the next three years, far exceeding the initial target of $99 million.

Chapter Guide:
Organization Overview: Slide #02
Problem and Challenges: Slide #04
Approach and methodology: Slide #14
Results, impact, and conclusion: Slide #28