The Future of Retail Operations

Retailing consists of all the activities associated with the selling of goods to the final consumer. In this article, we review the research on retail operations published in Manufacturing & Service Operations Research (M&SOM) since 1999. We then discuss the current retail landscape and the new research directions it offers, in which M&SOM can play a prominent role

Strategic Behaviour under Regulation Benchmarking

Liberalisation of generation and supply activities in the electricity sectors is often followed by regulatory reform of distribution networks. In order to improve the efficiency of distribution utilities, some regulators have adopted incentive regulation schemes that rely on performance benchmarking. Although regulation benchmarking can influence the �regulation game�, the subject has received limited attention. This paper discusses how strategic behaviour can result in inefficient behaviour by firms. We also present a survey of issues encountered by electricity regulators. We then use the Data Envelopment Analysis (DEA) method with US utility data to examine implications of selected cases of strategic behaviour. The results show that gaming can have significant effects on the measured performance and profitability of firms

E-Fulfillment and Multi-Channel Distribution – A Review

This review addresses the specific supply chain management issues of Internet fulfillment in a multi-channel environment. It provides a systematic overview of managerial planning tasks and reviews corresponding quantitative models. In this way, we aim to enhance the understanding of multi-channel e-fulfillment and to identify gaps between relevant managerial issues and academic literature, thereby indicating directions for future research. One of the recurrent patterns in today’s e-commerce operations is the combination of ‘bricks-and-clicks’, the integration of e-fulfillment into a portfolio of multiple alternative distribution channels. From a supply chain management perspective, multi-channel distribution provides opportunities for serving different customer segments, creating synergies, and exploiting economies of scale. However, in order to successfully exploit these opportunities companies need to master novel challenges. In particular, the design of a multi-channel distribution system requires a constant trade-off between process integration and separation across multiple channels. In addition, sales and operations decisions are ever more tightly intertwined as delivery and after-sales services are becoming key components of the product offering.Distribution;E-fulfillment;Literature Review;Online Retailing

Modeling the Psychology of Consumer and Firm Behavior with Behavioral Economics

Marketing is an applied science that tries to explain and influence how firms and consumers actually behave in markets. Marketing models are usually applications of economic theories. These theories are general and produce precise predictions, but they rely on strong assumptions of rationality of consumers and firms. Theories based on rationality limits could prove similarly general and precise, while grounding theories in psychological plausibility and explaining facts which are puzzles for the standard approach. Behavioral economics explores the implications of limits of rationality. The goal is to make economic theories more plausible while maintaining formal power and accurate prediction of field data. This review focuses selectively on six types of models used in behavioral economics that can be applied to marketing. Three of the models generalize consumer preference to allow (1) sensitivity to reference points (and loss-aversion); (2) social preferences toward outcomes of others; and (3) preference for instant gratification (quasi-hyperbolic discounting). The three models are applied to industrial channel bargaining, salesforce compensation, and pricing of virtuous goods such as gym memberships. The other three models generalize the concept of gametheoretic equilibrium, allowing decision makers to make mistakes (quantal response equilibrium), encounter limits on the depth of strategic thinking (cognitive hierarchy), and equilibrate by learning from feedback (self-tuning EWA). These are applied to marketing strategy problems involving differentiated products, competitive entry into large and small markets, and low-price guarantees. The main goal of this selected review is to encourage marketing researchers of all kinds to apply these tools to marketing. Understanding the models and applying them is a technical challenge for marketing modelers, which also requires thoughtful input from psychologists studying details of consumer behavior. As a result, models like these could create a common language for modelers who prize formality and psychologists who prize realism

Modeling customer bounded rationality in operations management: A review and research opportunities

Many studies in operations management started to explicitly model customer behavior. However, it is typically assumed that customers are fully rational decision-makers and maximize their utility perfectly. Recently, modeling customer bounded rationality has been gaining increasing attention and interest. This paper summarizes various approaches of modeling customer bounded rationality, surveys how they are applied to relevant operations management settings, and presents the new insights obtained. We also suggest future research opportunities in this important area

Pricing and Revenue Management

The focus of this chapter is on the strategic role of price in revenue management (RM). In order to successfully use price as a strategic weapon, firms must address two questions: what prices to charge and how’ to determine which customers or market segments should be offered those prices. In addition, companies must study and understand both customer and competitive reaction to their use of RM pricing. In this chapter, I address these questions through a review of the relevant literature and of current practice

Cumulative Prospect Theory Based Dynamic Pricing for Shared Mobility on Demand Services

Cumulative Prospect Theory (CPT) is a modeling tool widely used in behavioral economics and cognitive psychology that captures subjective decision making of individuals under risk or uncertainty. In this paper, we propose a dynamic pricing strategy for Shared Mobility on Demand Services (SMoDSs) using a passenger behavioral model based on CPT. This dynamic pricing strategy together with dynamic routing via a constrained optimization algorithm that we have developed earlier, provide a complete solution customized for SMoDS of multi-passenger transportation. The basic principles of CPT and the derivation of the passenger behavioral model in the SMoDS context are described in detail. The implications of CPT on dynamic pricing of the SMoDS are delineated using computational experiments involving passenger preferences. These implications include interpretation of the classic fourfold pattern of risk attitudes, strong risk aversion over mixed prospects, and behavioral preferences of self reference. Overall, it is argued that the use of the CPT framework corresponds to a crucial building block in designing socio-technical systems by allowing quantification of subjective decision making under risk or uncertainty that is perceived to be otherwise qualitative.Comment: 17 pages, 6 figures, and has been accepted for publication at the 58th Annual Conference on Decision and Control, 201