Dutch Delta team earns Edelman

Delta Program Commissioner’s project saves billions of euros, changes political policy and potentially saves the Netherlands from devastation.

Dutch Delta team earns Edelman Award

The Edelman-winning team included the Dutch Delta Commissioner of Holland, CPB Netherlands Bureau for Economic Policy Analysis, Delft University of Technology, Deltares, HKV Consultants, the Ministry of Infrastructure and the Environment (The Hague) and Tilburg University.

By Peter Horner

Since the Franz Edelman Award for achievement in operations research and management science was first awarded in 1972, dozens of contenders have won it for saving their company or organization multi-millions or even billions of dollars by using O.R. to increase efficiency. A few have won it for saving or making big money, but also for saving the company or organization itself from extinction. Rarely, if ever, however, has an Edelman winner saved multi-billions of dollars, reversed a government policy in the process and potentially saved a country from disaster.

Such was the case with this year’s winner, the Dutch Delta Program Commissioner’s office, which is responsible for overseeing and maintaining the 3,500-kilometer system of primary dikes that protects the flood-prone Netherlands, particularly the half of the country’s surface area in the north and west that lies slightly above or, in many cases, below sea level.

In a modern-day retelling of the classic tale “Hans Brinker, or the Silver Skates,” a consortium of Dutch organizations, headed by the Dutch Delta Program Commissioner, used O.R. to develop and implement a new method for calculating the most efficient levels of flood protection for the Netherlands. By identifying which dikes to fortify and to what extent, the massive project considerably improved the system of dikes that protects the Netherlands in an era of rising seas and sinking land while simultaneously saving the nation €7.8 billion in unnecessary expenditures.

The Dutch dike project prevailed in a tightly contested competition with a handful of outstanding finalists including Baosteel, Chevron, Dell, Kroger and McKesson (see accompanying story).

The Edelman Award is widely considered the “Super Bowl” of high-end analytics. It honors the best application of operations research following a nearly yearlong competition that begins with a nomination process, continues with a vetting process and concludes at the spring INFORMS Conference on Business Analytics & Operations Research with a series of finalists’ presentations and judges’ deliberations, all capped by the naming of the winner at the Edelman Awards Gala. Jeff Camm served as master of ceremonies for the gala, and INFORMS President Anne Robinson announced the winner before a packed ballroom of conference attendees, who rose in unison to applaud the Netherlands team.

The award-winning entry was a quintessential team effort: the Delta Commissioner of Holland collaborated with the CPB Netherlands Bureau for Economic Policy Analysis, Delft University of Technology, Deltares, HKV Consultants, Ministry of Infrastructure and the Environment, The Hague and Tilburg University on its entry titled, “Economically efficient flood standards to protect the Netherlands against flooding.”

The Project

“Almost 60 percent of the Netherlands is vulnerable to flooding,” explains Dutch Delta Commissioner Wim Kuijken. “The objective of the Dutch Delta approach is not to respond to a flood disaster but to avoid it. This innovative project has contributed significantly to improved flood protection in the Netherlands while at the same time steering public funds in the most efficient way.”

Each year, the Dutch government spends about €1 billion on protection by dikes and dunes. History has taught the Netherlands the importance of prevention, most notably in 1953 when the southwestern portion of the country was flooded, resulting in 2,000 deaths and enormous economic damage.

Determined to prevent another such disaster, the Dutch government established protection standards for all 53 dike rings throughout the country. The standards range from a safety norm of a flood chance of once every 4,000 years for less densely populated areas to once every 10,000 years for the western coastal region, which is densely populated and serves as the economic heart of the Netherlands.

In 2008, a second Delta Committee advised the government to increase the protection standard of all dike ring areas by a factor of 10. In order to provide a scientific basis for the decision process, Deltares (an independent institute for applied research in the field of water, subsurface and infrastructure) was engaged to conduct a cost/benefit analysis of the committee’s proposal and to determine economically efficient flood protection standards for all dike ring areas. The problem: Given cost constraints, how can the Netherlands best improve flood protection while minimizing the total long-term expected costs (investment costs for increasing the height and strength of dikes and the expected loss from flooding)?

Deltares worked the problem in conjunction with a consortium of organizations including Netherlands Bureau for Economic Policy Analysis, the country’s Ministry of Infrastructure and the Environment, Tilburg University, Delft University of Technology and HKV consultants. The team developed a cost-benefit model to derive the optimal strategy for each dike area while taking into account the dynamic effects of climate change and socioeconomic growth. Using state-of-the-art O.R. techniques such as simulation and mixed integer nonlinear programming, the team concluded that from an economic viewpoint, it was necessary to increase protection standards in only three regions, thereby directing limited resources to where they were most needed. Net result: O.R. helped improve the overall dike protection plan while saving nearly €8 billion in investment cost and reshaping political policy – no small feat. In 2012, the state secretary accepted the team’s recommendations as the basis for policy planning.

he Dutch Delta Program Commissioner’s office is responsible for overseeing and maintaining a 3,500-kilometer system of primary dikes that protects the flood-prone Netherlands.

The Dutch Delta Program Commissioner’s office is responsible for overseeing and maintaining a 3,500-kilometer system of primary dikes that protects the flood-prone Netherlands.

The Team

“I’m very, very proud of the entire team,” Jaap Kwadijk, scientific director of Deltares, said after the ceremonies. “It wasn’t just one organization. Instead, it’s a typical Dutch team in that we connected as many people as possible to look at the problem and do the research – government, universities and consultants – in order to get the best possible result. We are doing everything we can, including using operations research, to save our country.

“We are one of the first countries in the world preparing for rising sea levels and climate change, which require very, very long-term planning – 50 and 100 years out,” added Kwadijk, who accepted the Edelman Award on behalf of the entire Edelman-winning entry. “It’s an incredible undertaking and operations research plays a big part in it because you need to make not only optimal safety standards, but also economically efficient standards, and it becomes incredibly important to convince everyone – including the government – that you should do it. Operations research helps us achieve that.”

In his brief acceptance remarks, Kwadijk acknowledged and thanked a host of people including Delta Commissioner Kuijken, the members of the winning team, INFORMS, Edelman Award Committee members and judges and the other finalists, but he started by welcoming the team’s assigned Edelman coaches, Peter Kolesar and Yanni Papadakis, to the stage. “They helped us prepare for the competition and they were very, very sharp,” Kwadijk said. “I think that made the difference tonight because the other finalists were extremely good.”

When asked later what he thought put the Dutch team over the top, Kolesar said, “First of all, it’s the tremendous quality of the work that they did and the broad social impact on humanity. It’s a timey problem that’s being faced all over the world. We worked very hard on the presentation to get a very complicated story simplified and a direct presentation that could be understood.”

The Judges

The judges we talked to agreed that the Dutch entry deserved the Edelman. They also agreed that it was a very difficult decision, given the quality of the competition. In fact, the judges went into overtime debating the merits of the finalists, and they barely made it to the start of dinner at the gala before reaching a decision.

“Their project was very well put together,” said Edelman judge Peter Bell, addressing the Dutch Delta Program Commissioner’s presentation. “An amazing amount of work, excellent theoretical background and a huge impact. What impressed me is they actually managed to get a government to change its mind. At the end we were really struggling to differentiate, and I think that made the difference … and their total package was very strong.”

Added Edelman judge Graham Rand: “It was a very impressive presentation, especially with the minister of the government saying this project made a huge difference. The fact that it involved turning over a decision that had previously been made – and having the guy who had made that decision admitting that their new solution was a better one – well, not many people are prepared to do that professionally. So the project had a lot going for it and, of course, it addressed a huge problem for the country and made a huge contribution to solving it.”

Judge Srinivas Bollapragada, who like Bell and Rand has been involved in many Edelman competitions over the years, noted that the Dutch team “used good, solid O.R. techniques to come up with a solution that not only saved billions of euros and benefited an entire nation, but their technical work is transportable across many regions of the world.”

We’ll leave it to Rand to put the 2013 Edelman-winning entry into perspective: “Ultimately, this project was a matter of life and death for the Netherlands,” he said. “It’s a wonderful example of the use of O.R. in overturning political decisions and getting the agreement of the government, which is pretty rare, isn’t it? It’s a little bit more than putting your finger in the dike like the old story of the Little Dutch Boy we all grew up with.”

Peter Horner (horner@lionhrtpub.com) is the editor of OR/MS Today.

Barry List, director of communications for INFORMS, contributed to this article.

Editor's Note:

For more coverage of INFORMS practice-oriented awards presented at the spring conference, including the INFORMS, UPS and Innovative Applications in Analytics Award, see pages 58-59.

Five Edelman finalists

Following are summaries of this year’s five other Edelman finalists:

Baosteel:

“Operations Research Transforms Baosteel’s Operations”
Baosteel is China’s largest and the world’s third largest steel company. In the last six years, Baosteel worked with a team of operations researchers from three countries (China, the United States and the U.K.) to transform its in-plant production and logistics operations in four key areas of its entire steel production process. The team developed a set of novel optimization algorithms and tailored heuristics and implemented several decision support systems (DSSs) to replace Baosteel’s rule- and experience-based manual planning approaches. The DSSs have significantly reduced Baosteel’s production, inventory and energy consumption costs, increased revenue and improved product quality. More importantly, this project has brought modern scientific management methods to Baosteel and changed its planning and management culture through the use of advanced O.R.-based computerized systems.

Chevron:

“Optimizing Chevron’s Refineries”
Chevron, one of the world’s leading integrated energy companies, has developed a tool that is used in all its company-owned refineries that allows them to maximize the value of their feed purchase and product sales decisions. In addition, it optimizes how they run their refineries and guides their capital project work. This application of operations research, in conjunction with efficient work processes, generates significant value to Chevron and its customers.

Dell:

“Dell’s Retail Transformation through Analytics”

Dell is a very different company today than it was a few years ago. Dell Enterprise Solutions and Services now represent one-third of the company’s revenue and half of its gross margin. Dell is innovating and investing to expand its enterprise capabilities and industry-leading solutions to help customers achieve results faster and create a competitive advantage. More than 95 percent of Fortune 500 companies rely on Dell for IT solutions and services.

Dell ventured into the indirect and non-customizable channels in 2007 to address changing market conditions and growing competition. Dell’s channel transformation has helped it serve a variety of customers across the globe. This would not have been possible by relying only on the direct-to-customer model. Channel execution was supported by multiple cross-functional initiatives driven by the company’s Analytics Center of Excellence (CoE). Initiatives such as demand sensing/shaping, configuration optimizer, marketing vehicle attribution and media mix modeling have helped various functions within Dell to transform the way business is done.

The impact of these initiatives has been realized by various stakeholders, including channel partners. Dell’s nomination recognizes the application of operations research and advanced analytics to help Dell’s foray and profitable growth in multiple sales channels.

Kroger:

“Simulation and Optimization Improves Pharmacy Inventory Management at the Kroger Co.”

The Kroger Co. aspired to improve the inventory at the company’s more than 1,950 pharmacy locations. The operations research team, working with the business teams, designed a transparent simulation and optimization model for pharmacy inventory management. The system enabled the company to reduce out-of-stocks by 1.5 million prescriptions, lowered inventory by more than $100 million and yielded additional revenue of more than $70 million since Oct 2011. This intuitive and effective inventory system instantly won support from Kroger’s C-level executives and significantly contributed to the growth of O.R. at Kroger.

McKesson:

“A Holistic Supply Chain Sustainability Management Solution”

McKesson is America’s oldest and largest healthcare services company helping its customers achieve better health. IBM Research developed an innovative software solution (SCSM) for McKesson to optimize its end-to-end pharmaceutical supply chain policies. Through its integrated O.R. models, SCSM optimizes the distribution network, supply flow, inventory and transportation policies and quantifies the impacts of changes on financial, operational and environmental metrics. This model was the first to show profitability by product category for the different supply chains used by McKesson. It provided new insights into the supply chain’s profitability that have been incorporated into other pricing models.

The modeling work presented a roadmap of projects with quantified opportunities, including a new Air Freight supply chain, and provided new insights that have been critical to McKesson’s improved performance as an industry leader. As important as the modeling work has been, the new structured data supporting the model has provided a rich basis for additional improvement projects. Since this effort began in 2009 McKesson Pharmaceutical division has reduced its committed capital by over $1 billion.