Managing customer relationships through price and service quality

This paper examines the ways in which a service provider's policies on pricing and service level affect the size of its customer base and profitability. The analysis begins with the development of a customer behavior model that uses customer satisfaction and depth of relationship as mediators of the impact of price and service level on profitability. Based on this model of customer behavior, the system is analyzed as a queuing network from which the properties of the aggregate population's behavior are derived. The analysis reveals the counterintuitive result that a policy that involves a decrease in prices or an increase in service level may lead to a smaller customer base. However, this policy may also lead to higher profits. The novelty of this result lies in the explanation of the phenomenon: that when the customer base decreases due to a change in prices or service quality, companies may experience gains in profit that result not from a decrease in costs associated with serving fewer customers but from an increase in revenues resulting from the indirect effects of the lower prices or higher level of service on customer behavior. The application of optimization techniques to the model developed in this paper yields optimality conditions through which managers can assess the long-term profitability of their pricing and service-level policies.Customer relationship management; operations/marketing interface; two-part tariffs; service operations management; service quality;

Duality Based Characterizations of Efficient Facets

Most practical applications of multicriteria decision making can be formulated in terms of efficient points determined by preference cones with polyhedral closure. Using linear approximations and duality from mathematical programming, we characterize a family of supporting hyperplanes that define the efficient facets of a set of alternatives with respect to such preference cones. We show that a subset of these hyperplanes generate maximal efficient facets. These characterizations permit us to devise a new algorithm for generating all maximal efficient facets of multicriteria optimization problems with polyhedral structure.Supported in part by the National Science Foundation grant MCS77-24654. Supported in part by the Army Research Office (Durham) contract DAAG29-76-C-0064

Coordination of Supply Chain Networks and the Emergence of Mini-maestros

Abstract Companies recognize international sourcing as a business practice useful to reduce product prices, deal with supply shortages and identify new competitive suppliers. Effective international sourcing implies the integration and coordination of materials, processes, information flows and multiple producers at each buying location. Many companies do not have the capabilities or the willingness to develop and manage such sourcing networks; therefore, other entities have assumed these responsibilities. These coordinators are in charge of the integration of many suppliers to develop full-package production, serve as liaisons between suppliers’ capabilities and market demands, and provide the technical and financial support to sustain the sourcing network. The review of the industrial clustering and global supply chain literature allowed the identification of such coordinators in Mexico. The emergence and profile of these coordinators is associated with corporate strategies of multinational firms, the efforts of industrial groups, and the governmental policies for the development of dynamic industrial regions. This paper analyzes the characteristics of four coordination models identified in the Mexican context, focusing on their contribution to the participation and upgrading of national suppliers. The profile of the coordinator firm, the type of relations that this firm sustains with producers and the support offered to suppliers is also discussed. A particular emphasis is given to the fourth model where a third party, a knowledge and service company, assumes the coordinator role. The interest on this model is due to its novelty, the flexibility of the sourcing network, and the potential impact on regional development that could result from the intervention of a neutral third party as coordinator of the activities of multiple local and specialized suppliers

Inverse Optimization: An Application to the Capacitated Plant Location Problem

Inverse optimization refers to the fact that each time a Lagrangean derived from a given mathematical programming problem is solved, it produces an optimal solution to some problem with a different right hand side. This paper reports on the application of inverse optimization to the capacitated plant location problem including the study of implied mappings of dual variables into the space of demand vectors. A new parametric method based on inverse optimization and subgradient optimization is also presented.Research supported, in part, by the National Science Foundation under Grant No. MCS77-24654

Choice Models and Customer Relationship Management

Customer relationship management (CRM) typically involves tracking individual customer behavior over time, and using this knowledge to configure solutions precisely tailored to the customers' and vendors' needs. In the context of choice, this implies designing longitudinal models of choice over the breadth of the firm's products and using them prescriptively to increase the revenues from customers over their lifecycle. Several factors have recently contributed to the rise in the use of CRM in the marketplacePeer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/47023/1/11002_2005_Article_5892.pd

An overview of tradeoff curve analysis in the design of manufacturing systems Uma visão geral da análise de curvas de tradeoff no projeto de sistemas de manufatura

Uncertainty in manufacturing systems has long been the source of managerial complexity. In this paper we discuss the impact of different sources of uncertainty and present a methodology to assess their impact on system behavior. We introduce the concept of tradeoff curves as a characteristic of a manufacturing system and illustrate their use to make decisions concerning the amount and type of capacity necessary to manage the system efficiently, to assess the impact of products arrival and processing uncertainties, as well as the consequences of changes in throughput and product mix. The methodology is illustrated with an example derived from an actual application in the semiconductor industry.Incerteza nos sistemas de manufatura tem sido há muito tempo fonte de complexidade gerencial. Neste artigo discutimos o impacto de diferentes fontes de incerteza e apresentamos um metodologia para avaliar tal impacto no comportamento do sistema. Introduzimos o conceito de curvas de tradeoff como uma característica de um sistema de manufatura e ilustramos sua utilização para tomar decisões com respeito à quantidade e tipo de capacidade necessária para gerir o sistema eficientemente, para avaliar o impacto de incerteza na chegada e processamento de produtos, assim como as conseqüências de mudanças na taxa média de produção e no mix de produtos. A metodologia é ilustrada com um exemplo derivado de uma aplicação real numa indústria de semicondutores

Planning and scheduling for epitaxial wafer production facilities

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