Research Articles
In this issue we bring you three great articles from the pages of INFORMS journals. The purpose of this section is to highlight research that is both accessible and interesting, and these papers certainly fulfill those criteria.
Outsmarting smart customers
In the first article we reprint, The Value of Fast Fashion: Quick Response, Enhanced Design, and Strategic Consumer Behavior, Gerard Cachon and Robert Swinney delve into strategic consumer behavior in the fast fashion industry. They develop a model that accounts for both short lead times (so that there is less of a chance of lots of extra denim shorts at summer’s end) as well as design enhancements (making clothes super trendy so that customers just have to have them now). They show that the combination of these two effects is complementary: the presence of both is greater than the sum of the presences of each. This in part explains the success of companies such as Zara, which have mastered the art of making just enough must-have clothes, enticing even strategic customers to buy items now instead of risking coming back tomorrow and not finding what they want.
Reprinted by permission, Gérard P. Cachon and Robert Swinney, "The Value of Fast Fashion: Quick Response, Enhanced Design, and StrategicConsumer Behavior", Management Science, volume 57, number 4, April 2011. Copyright 2011, the Institute for Operations Research and the Management Sciences, 7240 Parkway Drive, Suite 300, Hanover, Maryland 21076 USA.
Trimming the Fat from Spam
“I see lean as still an immature adolescent. We sort of know what it’s supposed to do, but we don’t have a good handle on how to control it,” writes Richard Shonberger in his article The Art and Science of Practice: Taking the Measure of Lean: Efficiency and Effectivenes. Drawing on examples from companies such as Hormel, the maker of Monty Python’s favorite canned meat, and Cooper Industries, the author talks about where “lean” as a concept works and where it needs to be fleshed out more. Inventory turns, a ratio of sales rate to on-hand inventory and arguably one of the most watched operational metrics by Wall Street, is specifically examined and discussed.
Reprinted by permission, Richard J. Schonberger, "ASP, The Art and Science of Practice: Taking the Measure of Lean: Efficiency and Effectiveness", INTERFACES, volume 41, number 2, March-April 2011. Copyright 2011, the Institute for Operations Research and the Management Sciences, 7240 Parkway Drive, Suite 300, Hanover, Maryland 21076 USA.
Hedging your Bets
Lastly, we bring you a paper by Giesecke et al. on A Top-Down Approach to Multiname Credit. The authors develop a financial engineering model that values multiname credit derivatives by including information on the parts of the portfolio, instead of relying solely on the aggregate information. The authors apply these models to securities whose payoffs are tied to losses due to default in the portfolio. Their model, which can be used for those all-too-famous credit default swaps (among others), also provides a probabilistic model that predicts the next-to-default constituent within a portfolio.
Reprinted by permission, Kay Giesecke, Lisa R. Goldberg, Xiaowei Ding, "A Top-Down Approach to Multiname Credit", Operations Research, volume 59, number 2, March-April 2011. Copyright 2011, the Institute for Operations Research and the Management Sciences, 7240 Parkway Drive, Suite 300, Hanover, Maryland 21076 USA.