Information and Inventory Recourse for a Two-Market, Price-Setting Retailer

We analyze the problem of determining inventory and pricing decisions in a two-period retail setting when an opportunity to refine information about uncertain demand is available. The model extends the newsvendor problem with pricing by allowing for multiple suppliers, the pooling of procurement resources, and more general informational dynamics. One contribution is the solution procedure: we show that all decisions (up to seven in all, including recourse decisions) can be determined uniquely as a function of a surrogate first-period decision called the stocking factor. Hence, the two-period decision problem with recourse reduces to a search for one .decision variable. A second contribution is the policy implications: we find that the cost of learning is (I) a consequence of censored information because, on the margin, learning is free if full information is guaranteed; (2) measured in the form of an increased stocking factor; and (3) shared with the consumer in. the form of a higher selling price when demand uncertainty is additive. A third contribution is the application of the results to three motivating examples: A market research problem in which a product is introduced in a test market prior to a widespread launch; a global newsvendor problem in which a seasonal product is sold in two different countries with non-overlapping selling seasons; and a minimum-quantity commitment problem in which procurement resources for multiple purchases may be pooled

Inducing Compliance with Post-Market Studies for Drugs under FDA’s Accelerated Approval Pathway

Problem definition: In 1992, FDA instituted the accelerated approval pathway (AP) to allow promising drugs to enter the market based on limited evidence of efficacy, thereby permitting manufacturers to verify true clinical benefits through post-market studies. However, most postmarket studies have not been completed as promised. We address this non-compliance problem. Academic/Practical Relevance: The prevalence of this non-compliance problem poses considerable public health risk, thus compromising the original purpose of a well-intentioned AP initiative. We provide an internally consistent and implementable solution to the problem through a comprehensive analysis of the myriad complicating factors and tradeoffs facing FDA. Methodology: We adopt a Stackelberg framework in which the regulator, which cannot observe the manufacturer’s private cost information or level of effort, leads by imposing a post-market study deadline. The profit-maximizing manufacturer then follows by establishing its level of effort to invest in its post-market study. In establishing its deadline, the regulator optimizes the tradeoff between providing public access to potentially effective drugs and mitigating public health risks from ineffective drugs. Results: We develop a deadline-dependent user fee menu as a screening mechanism that establishes an incentive for manufacturer compliance. We show that its effectiveness in inducing compliance depends fundamentally on the enforceability of sanction, a drug-specific measure that indicates how difficult it is to withdraw an unproven drug from the market, and the drug’s success probability: The higher is either, the higher is the probability that the mechanism induces compliance. Managerial Implications: We synthesize and distill the salient tradeoffs and nuances facing FDA’s non-compliance problem and provide an implementable solution. We quantify the value of the solution as a function of a drug’s success probability and enforceability. From public policy perspective, we provide guidance for FDA to increase the viability and effectiveness of AP

Recent trends in soft-tissue infection imaging.

This article discusses the current techniques and future directions of infection imaging with particular attention to respiratory, central nervous system, abdominal, and postoperative infections. The agents currently in use localize to areas of infection and inflammation. An infection-specific imaging agent would greatly improve the utility of scintigraphy in imaging occult infections. The superior spatial resolution of (18)F-fluorodeoxyglucose positron emission tomography ((18)F-FDG-PET) and its lack of reliance on a functional immune system, gives this agent certain advantages over the other radiopharmaceuticals. In respiratory tract infection imaging, an important advancement would be the ability to quantitatively delineate lung inflammation, allowing one to monitor the therapeutic response in a variety of conditions. Current studies suggest PET should be considered the most accurate quantitative method. Scintigraphy has much to offer in localizing abdominal infection as well as inflammation. We may begin to see a gradual increase in the usage of (18)F-FDG-PET in detecting occult abdominal infections. Commonly used modalities for imaging inflammatory bowel disease are scintigraphy with (111)In-oxine/(99m)Tc-HMPAO labeled autologous white blood cells. The literature on central nervous system infection imaging is relatively scarce. Few clinical studies have been performed and numerous new agents have been developed for this use with varying results. Further studies are needed to more clearly delineate the future direction of this field. In evaluating the postoperative spine, (99m)Tc-ciprofloxacin single-photon emission computed tomography (SPECT) was reported to be \u3e80% sensitive in patients more than 6 months after surgery. FDG-PET has also been suggested for this purpose and may play a larger role than originally thought. It appears PET/computed tomography (CT) is gaining support, especially in imaging those with fever of unknown origin or nonfunctional immune systems. Although an infection-specific agent is lacking, the development of one would greatly advance our ability to detect, localize, and quantify infections. Overall, imaging such an agent via SPECT/CT or PET/CT will pave the way for greater clinical reliability in the localization of infection

Reducing the environmental impact of surgery on a global scale: systematic review and co-prioritization with healthcare workers in 132 countries

Abstract Background Healthcare cannot achieve net-zero carbon without addressing operating theatres. The aim of this study was to prioritize feasible interventions to reduce the environmental impact of operating theatres. Methods This study adopted a four-phase Delphi consensus co-prioritization methodology. In phase 1, a systematic review of published interventions and global consultation of perioperative healthcare professionals were used to longlist interventions. In phase 2, iterative thematic analysis consolidated comparable interventions into a shortlist. In phase 3, the shortlist was co-prioritized based on patient and clinician views on acceptability, feasibility, and safety. In phase 4, ranked lists of interventions were presented by their relevance to high-income countries and low–middle-income countries. Results In phase 1, 43 interventions were identified, which had low uptake in practice according to 3042 professionals globally. In phase 2, a shortlist of 15 intervention domains was generated. In phase 3, interventions were deemed acceptable for more than 90 per cent of patients except for reducing general anaesthesia (84 per cent) and re-sterilization of ‘single-use’ consumables (86 per cent). In phase 4, the top three shortlisted interventions for high-income countries were: introducing recycling; reducing use of anaesthetic gases; and appropriate clinical waste processing. In phase 4, the top three shortlisted interventions for low–middle-income countries were: introducing reusable surgical devices; reducing use of consumables; and reducing the use of general anaesthesia. Conclusion This is a step toward environmentally sustainable operating environments with actionable interventions applicable to both high– and low–middle–income countries

Inventory and Pricing in Global Operations: Learning From Observed Demands

We develop a two-period model applicable to global sourcing by considering a firm that operates in two markets: one is located in the U.S. and the second is in a country having a selling season that does not overlap with the U.S. selling season. Demand for each market depends linearly on the selling price and includes an unknown scale parameter. We assume that the firm learns from sales in the first market to assist decision making in the second. We also assume a single procurement opportunity, but allow the firm to ship leftovers from the first market to the second if doing so is profitable. Our results include the characterization of the optimal recourse policy, which represents the firm\u27s decisions made at the beginning of the second selling season after it observes both sales in the first market and a realized value of the foreign exchange rate. Additionally, we provide a sufficient condition for reducing the optimization problem to a maximization over a single variable that we interpret as the safety stock for the first market. Further, we provide evidence that the sufficient condition is a rather mild one, likely to be satisfied in practical applications. We also establish a lower bound on the optimal value of the first-market safety stock, thereby truncating the search region of the last decision variable. This lower bound represents the optimal safety stock for the first market if that decision were made myopically, without regard to its effect on the profit associated with the second market

Learning models for pricing and inventory control under uncertainty

Optimal operating policies and corresponding managerial insight are developed for a monopolist that establishes on a periodic basis both a stocking level and a selling price for a single product while exploiting information gathered from ongoing operations. Given management situations in which the demand function depends on selling price and includes an unknown scale parameter, learning occurs as the firm monitors the market\u27s response to its decisions and then updates its characterization of the demand function. Of primary interest is the effect of censored data because, in many practical circumstances, a firm\u27s observations are restricted to sales rather than demand. Mathematical models are formulated and analyzed for several scenarios. For example, consideration is given both to a perishable product case (which corresponds to the situation in which the firm transfers information from period to period, but not inventory) and a durable product case (which corresponds to the situation in which the firm transfers information and inventory from period to period). Also considered are two forms for the price-dependent demand function, differentiated by whether the unknown scale parameter is incorporated as an additive or a multiplicative term. In an extension, the effects of learning and the strategic roles of inventory and pricing are analyzed for a firm operating in a two-market, international setting with only a single opportunity to procure. In general, results indicate that the firm\u27s joint quantity/price problem reduces to a single variable problem in which the firm\u27s principal decision is its safety stock. In particular, the firm\u27s most recent decision for safety stock sufficiently captures past learning, thereby providing all relevant information for revising the characterization of the demand function. And, given the optimal safety stock for a given period, both the optimal stocking quantity and the optimal selling price are established myopically. Further results include an algorithm for computing the optimal safety-stock decisions for a multi-period problem. From a managerial standpoint, evidence is provided to suggest that the firm\u27s first-period optimal decision for selling price increases with the length of the problem horizon, although the same is not necessarily true of the stocking quantity

Managing Fashion Goods Inventories:

The proliferation of both online and bricks and mortar outlet stores underscores the observation that secondary markets are readily accessible to retailers of short-life-cycle products. These secondary markets provide recourse channels for retailers to sell excess inventory of out of favor items at reduced prices when overstocking occurs in a primary market. We study the problem of determining when a retailer should terminate its primary selling season by selling remaining inventory on a secondary market. The retailer has a single opportunity to procure prior to a primary selling season consisting of multiple periods. Demand in each period is random,but correlated. At the end of each period, any remaining inventory incurs a holding cost. Then,based upon the current level of inventory and the cumulative demand-to-date,the retailer decides either to terminate the primary selling season by selling all or part of the remaining inventory on a secondary market,or to extend the current primary selling season by another period. We develop structural properties of the optimal policy for determining when to terminate the primary selling season,and we develop corresponding implications for procurement.