Friday, May 4, 8:30-10:00 Room: Brasserie Track: Prod Innov, 1 Chair: Christian Terwiesch 1 Session: Open Innovation and R&D Outsourcing 007-0100: Innovation Contests and Multi-Agent Problem Solving Christian Terwiesch, Wharton School, United States Yi Xu, University of Miami, United States In an innovation contest, a firm (the seeker) facing an innovation related problem (e.g., a technical R&D problem) posts this problem to a population of independent agents (the solvers) and then provides an award to the agent that has generated the best solution. In this paper, we analyze the interaction between a seeker and a set of solvers. Prior research in Economics suggests that having many solvers work on an innovation problem will lead to a lower equilibrium effort for each solver, which is undesirable from the perspective of the seeker. In contrast, we establish that the seeker can benefit from a larger solver population as he obtains a more diverse set of solutions, which mitigates and sometimes outweighs the effect of the solvers’ under-investment in effort. 007-0303: The Butterfly Effect: Modularizing Risk in Distributed Innovation Presenting Edward Anderson, University of Texas at Austin, United States Nitin Joglekar, Boston University, United States We explore distributed innovation decisions from a systems perspective. This approach enables us to link the architectural, behavioral, competitive, and demand risks though feedback mechanisms. We argue that decisions underlying such innovation structures are susceptible to the butterfly effect: path dependent amplification of small uncertainties due to feedback and dynamic complexity can lead to unintended consequences. One way to combat these uncertainties is through modularizing risk. 007-0102: An Empirical Analysis of Software Auctions Christian Terwiesch, Wharton School, United States Elena Krasnokutskaya, University of Pennsylvania, United States We study software auctions as organized by a leading market provider for such services. Potential buyers can post software projects and wait for coders to submit bids for them. Our focus is on how buyers choose which coder will be awared the project. We are particularly interested in the role of coder location. 007-0330: The Effects of Problem Structure and Team Expertise on Brainstorming Effectiveness Stylianos Kavadias, Georgia Institute of Technology, United States Svenja Sommer, Purdue Universtity, United States Since Osborne (1957) group brainstorming has acquired a central role during the ideation stage of many product development projects. The reason is its widely claimed effectiveness in identifying solutions to product design problems. Yet, the psychology literature has repeatedly and through a significant number of experiments pointed out a strong disagreement with this assertion (e.g. Paulus 2000). In this paper we revisit the two different arguments and develop a formal model for the group brainstorming task. We find that depending on the problem structure (complexity of the landscape of solutions) and the team variation in knowledge expertise there may be cases where brainstorming is effective and others where it is not. The introduced formalization allows us to propose an experiment that could enrich the existing psychology literature. Friday, May 4, 8:30-10:00 Room: Continental Track: Supply Chn, 1 Chair: Elias Kirche 2 Session: Demand Management in Supply Chains 007-0727: Impact of Manufacturing Overhead on Order Management in a Two-Level Supply Chain Elias Kirche, Florida Gulf Coast University, United States Rajesh Srivastava, Florida Gulf Coast University, United States Order management has received increased focus in the Operations Management literature recently. With advances in technology and availability of Advanced Planning Systems (APSs), firms have extended their collaboration with customers and suppliers in order to improve service levels and profits. APSs allow firms the ability to do order management in real time with improved synchronization of resources and the potential to incorporate real-time costing. Additionally, the increased focus of firms on their supply chains has changed the nature of overhead costs as a percentage of total manufacturing costs. At the same time labor content is diminishing due to increased outsourcing. We evaluate the impact of overhead cost structure on the order management process in terms of profitability and service levels. Specifically, we consider the impact on real-time order management in an assemble-to-order environment for a two-level supply chain using a commercially available APS. 007-0297: Connecting Sales and Procurement: Creating Customer-Driven Product Substitutions to Manage Demand Uncertainty Feng Cheng, IBM Research, United States Markus Ettl, IBM Research, United States Pu Huang, IBM Research, United States Karthik Sourirajan, IBM Research, United States We describe an integrated supply/demand planning method that aims at creating a financially viable product portfolio based on customer preferences. We formulate an optimization model that determines build volumes and new product configurations for up-selling, alternative-selling and down-selling to avoid costly inventory overages and shortages under stochastic demand. To model customer preferences, we use a price sensitivity parameter that determines the incremental price that the customer is willing to pay for an alternative product, and a quality sensitivity parameter that determines the customer’s valuation of a product. The proposed model connects the interaction of customers and sales teams to the procurement and manufacturing capabilities of a firm. We exploit the problem structure and develop a decomposition procedure to efficiently solve industry-size problems. We highlight the advantages of the proposed method through numerical experiments with realistic production data. 007-0728: Order Management and Opportunity Costs in an Integrated Supply Chain Rajesh Srivastava, Florida Gulf Coast University, United States Elias Kirche, Florida Gulf Coast University, United States The use of advanced planning systems (APSs) has provided firms the ability to synchronize operations with suppliers and engage in real-time order management. The system is efficient in order management and in the allocation of resources with real time accounting, as well as in the determination of real time profits. However, order management rules incorporated in such systems may not generate the best results due to the failure to consider opportunity costs associated with orders size, product contribution margin, production capacity, inventory levels, order due dates and other production parameters. In this study, we incorporate opportunity costs in our order management decision rule and compare with existing rules from the literature which considers only capacity or contribution margin of each individual order. 007-0535: “Shrinking Demand”: Competition Between Two Supply Chains David Dilts, Vanderbilt University, United States Surya Pathak, Vanderbilt University, United States This research investigates a simple model of competition between two supply chains, each consisting of an assembler, a tier-1 and a tier-2 supplier. While the tier-1 suppliers act as information barriers, tier-2 supplier is common to both the SC’s and supplies a basic material. The two assemblers sell a differentiated product (highly specialized / generalized) and have seperate price driven demand curves. They compete for the supply of the base material as the tier-2 supplier cannot supply the entire market demand. The tier-2 supplier follows a simple strategy of supplying in full to the SC that offers a higher price. With the help of a simple discrete event simulation we investigate the effects of different strategies that the assemblers could use to ensure higher demand and profitability. We particularly analyze the model from an evolutionary angle and identify if any patterns of behavior is observed in this simple system. Friday, May 4, 8:30-10:00 Room: Executive Track: Opt Models, 1 Chair: Jiawei Zhang 3 Session: New Optimization Approaches for Supply Chain Problems 007-0566: A Stochastic Programming Duality Approach to Inventory Centralization Games Xin Chen, University of Illinois, United States A class of cooperative games arising from inventory centralization is studied in this paper. The optimization problems corresponding to the inventory games are formulated as stochastic programs. We observe that the strong duality of stochastic linear programming not only directly leads to a series of recent results concerning the non-emptiness of the cores of such games, but also suggests a way to find an element in the core. We also study a newsvendor game with quantity discount ordering cost. 007-0567: Duality Approaches to Economic Lot Sizing Games Jiawei Zhang, New York University, United States We use duality to analyze economic lot sizing games with concave ordering cost. The standard formulation of the corresponding optimization problem is a concave minimization problem and hence linear programming duality does not directly apply. However, we present a new formulation for the problem and construct a dual of it without a duality gap. We show that when both the inventory holding cost and backlogging cost are linear functions, there exists an optimal dual solution that defines an allocation in the core. An interesting feature of our approach is that it is not necessarily true that every optimal dual solution gives a core allocation. 007-0559: Supply