The best cases competition recognizes outstanding examples of projects that change organizations and people’s lives. This is the 32nd year of the prestigious competition, which has been nick-named the World Series of the operations research field.
Last year, Continental Airlines and CALEB Technology were recognized for applying a disaster recovery system that showed exceptional resiliency on September 11. Previous winners include IBM, Merrill Lynch, and the AIDS Division of the New Haven Connecticut Health Department.
The Edelman competition takes place Monday, May 5 from 9:10 AM to 5:20 PM. The winner will be announced Tuesday, May 6 at 8 AM. The competition is being held at an INFORMS conference, "Creating Value in the Extended Enterprise," which takes place at the Sheraton Wild Horse Pass Resort and Spa in Phoenix from May 4 – 6. Information about the conference is online at http://www2.informs.org/Conf/Phoenix2003
The finalist papers will be published in the January, 2004 issue of the INFORMS publication Interfaces.
The INFORMS Edelman Award recognizes outstanding implemented work that has had a significant, positive impact on the performance of the client organization. The top finalist receives a $10,000 first prize.
Background on the six finalists for the 2003 INFORMS Edelman Award follows:
Bank Hapoalim: "Opti-Money at Bank Hapoalim: A Model-Based Investment Decision Support System for Individual Customers." Bank Hapoalim: Mordecai Avriel, Hanna Pri-Zan, Ronit Meiri, and Avi Peretz.
In 1995 Bank Hapoalim, Israel’s largest bank, introduced Private Banking units to help customers invest. The bank’s Department of Analytic Development was instructed to identify areas in which quantitative methods for finance could make an impact. It developed Opti-Money, a decision-support system to help with Customer Relationship Managers (CRM) give investment advice. Opti-Money recommends the proportion of assets in a portfolio so that a specified performance target is achieved.
Benefits: Opti-Money has benefited the bank and its customers. In the period 1998-2002 the cumulative return for Opti-Money users was 32.4% for customers with conservative investment strategies and 50.6% for less risk-averse customers. This compares with a cumulative return of 15.8% on Israel’s Consumer Price Index and 16.7% on the Tel Aviv stock market. In the first three quarters of 2002, buy-and-sell orders given in Opti-Money sessions totaled $21 billion. Bank annual net income directly attributed to Opti-Money exceeded $24 million.
Canadian Pacific Railway: "Perfecting the Scheduled Railroad: Model-Driven Operating Plan Development." Canadian Pacific Railway: Phil Ireland, Rod, Case, John Fallis; MultiModal Applied Systems, Inc.: Carl Van Dyke, Jaso Kuehn, Marc Meketon.
North American freight railroads rely heavily on "tonnage-based dispatching," in which trains are only run when enough traffic has accumulated. Although this approach minimized costs, it disrupts the efficient utilization of crews, locomotives, and equipment. It yields highly inconsistent transit times, causing many customers to favor truck transportation instead. Toback customers, Canadian Pacific Railway (CPR) explored the concept of returning to a fixed schedule.
Concerned that a fixed timetable would rebound with escalated costs, CPR and MultiModal Applied Systems developed an operating plan that was tightly matched to traffic patterns. This included optimization of the routing and classification plan for each railcar movement and determination of which trains to run. They tailored the plan to recurring daily fluctuations in car volumes and developed contingency plans for high and low volume days. Shortest path based algorithms within MultiRail identified opportunities to reduce equipment miles, train-miles, and train-hours, thereby reducing operating cost and transit time.
Benefits: Adoption of the scheduled railroad approach, including associated benefits from infrastructure and locomotive fleet investment and business process improvements, trimmed costs by $170 million (Can$300 million).
Hewlett-Packard: "Accelerating the Profitability of Hewlett-Packard’s Supply Chains." Hewlett-Packard: Corey Billington, Gianpaolo Callioni, Barrett Crane, Julie Unruh-Rapp, Trace White; Optiant: John Ruark; Boston University: Sean P. Willems.
The efficient frontier of a supply chain network represents the minimum supply chain cost that can be achieved for a given service level. While the efficient frontier is a useful way of examining the tradeoff between supply chain cost and service, it presents real-world problems. In their quest for an efficient supply chain, business units within hp had been asking for tools that would let them perform their own supply chain network analysis. Previous models weren’t sufficient.
A standard and common process for analysis coupled with advancement in inventory optimization techniques enabled Hewlett Packard to invent a new and robust way to design supply chain networks. This new methodology piloted by HP’s Digital Imaging Division, has received sponsorship from HP's Executive Supply Chain Council, and is now being deployed across the entire company. A dozen product lines have been exposed to this methodology, with four product lines already integrating this process into both the configuration of their new product supply chains and the improvement of existing product supply chains.
Benefits: Over $130 million in savings has been realized to date. The Executive Supply Chain Council has endorsed this methodology disseminated to well over 100 business users across hp.
Menlo Worldwide Forwarding: "Network Routing Optimization for Menlo Worldwide Forwarding." Menlo Worldwide Forwarding: Robert C. Prior, Rob L. Slavens, Gerard Trimarco; Menlo Worldwide Technologies: Vedat Akgun, Edward G. Feitzinger, Chyi-Fu Hong.
Menlo Worldwide Forwarding, part of the Menlo Worldwide group of global supply chain service providers, is a global heavyweight cargo shipping company for business, industry, and governments that moves millions of pounds of freight every day. When the company sought to improve its North American transportation operations, it collaborated with Menlo Worldwide Technologies to create the Forwarding Network Optimization System. Working together within an environment that emphasized people, processes, and technology, the project team developed a decision-modeling tool to optimize the logistics network and routing plans; maximize utilization of the company’s integrated aircraft and truck networks, and; increase the flexibility of routing plans to accommodate the dynamic and complex requirements of the shipment network. Moreover, Menlo Worldwide Forwarding used the optimization model to facilitate its transition from an asset-intensive airfreight transportation company to an asset-light freight forwarding business. This created a more flexible operating environment and provides a competitive advantage for future operations.
Benefits: Using model results to maximize network utilization, Menlo Worldwide Forwarding dramatically reduced its operating costs and the time needed to plan its routing network. The company increased its network capacity utilization by 30 percent and reduced its operating cost by 21 percent.
Texas Children’s Hospital: "Contract Optimization at Texas Children’s Hospital." Texas Children’s Hospital: Chris Born, Monica Carbajal, Pat Smith, Mark Wallace; PROS Revenue Management: Kirk Abbott, Surain Adyanthaya, E. Andrew Boyd, Curtis Keller, Jin Liu, Wayne New, Tom Rieger, Ron Woestemeyer.
Faced with mounting financial pressure, Texas Children’s Hospital, which U.S. News and World Report ranks in the top 10, found its mission in jeopardy. Confronted on one side with insurance companies seeking to reduce expenditures, and on the other with doctors who wanted to maintain the hospital’s world-class standing, the hospital introduced greater analytic capabilities to administrative operations.
Like all health care providers, Texas Children’s Hospital is faced with perpetual contract negotiations with insurance providers, and the results of these negotiations have a profound impact on annual financial performance. Fully appreciating the complexity of determining what makes a good contract requires understanding the many intricacies related to hospital operations, billing, costs, and contractual structures. Recognizing these complexities, the team’s optimization efforts led to clearly identifiable achievements.
Benefits: In 2002, the system for managing contract revenue was implemented, leading to contract revenue increases of nearly $6 million on a number of the 150 contracts within the managed care contract portfolio. The team’s achievements are replicable across the health care industry and other industries dealing with similar contract issues.
UPS: "Planning the UPS Air Network." UPS Air Group: Keith A. Ware, Alysia M. Wilson; United States Air Force Academy: Andrew P. Armacost; Massachusetts Institute of Technology: Cynthia Barnhart.
Operations research specialists at UPS Airlines and MIT created a system to optimize service network design for express package delivery. The approach simultaneously determines minimal-cost aircraft routes, fleet assignments and the allocation of packages to routes to ensure overnight delivery.
UPS is the world’s largest package delivery company, serving over 200 countries and territories. UPS relies on the efficient design and operation of its hub-and-spoke air network, with seven hubs and nearly 100 additional airports in the U.S., to move over a million domestic Next Day Air packages every night. The joint research and development effort resulted in an optimization-based planning system for designing the UPS aircraft network.
Known methods for solving large-scale network design problems were inadequate for planning the UPS air network. The primary obstacles were the complexity and immense size of the air operation, which involves over 17,000 origin-destination flows and more than 160 aircraft of nine different types.
Benefits: UPS planners now use both solutions and insights generated by the system to create improved plans. UPS management credits the system with identifying operational changes that have saved over $87 million to date, and are anticipating additional savings of $189 million over the next ten years.
The team anticipates that the system will yield future savings in the hundreds of millions of dollars.
The Institute for Operations Research and the Management Sciences (INFORMS®) is an international scientific society with 10,000 members, including Nobel Prize laureates, dedicated to applying scientific methods to help improve decision-making, management, and operations. Members of INFORMS work in business, government, and academia. They are represented in fields as diverse as airlines, health care, law enforcement, the military, the stock market, and telecommunications. The INFORMS website is at http://www.informs.org.