Raman, Ananth →

How One Late Employee Can Hurt Your Business: Data from 25 Million Timecards

Employees who clock in a few minutes late—or not at all—often dampen sales and productivity, says a study of 100,000 workers by Ananth Raman and Caleb Kwon. What can managers do to address chronic tardiness and absenteeism?

Improving Store Liquidation

Store liquidation, defined as the time-constrained divestment of retail stores through an in-store sale of inventory, is a critical aspect of the retail industry for both defunct and going concerns. Store liquidation is important for firms and investors, affecting everything from retailer performance to how retailers are financed and how investors are compensated. Further, store liquidation is fundamental to innovation in the retail sector, since extracting value from defunct stores and firms is a key step in the process of creative destruction. In this paper, the authors introduce methods for increasing the efficiency of store liquidations operated by retail asset disposition firms, and they thus extend management science techniques to a consequential problem that has not yet been addressed by the literature. These methods were developed through a collaboration with GBG, a prominent liquidator, during the liquidation of over $3B of inventory. Key concepts include: This paper introduces a method for improving the efficiency of store liquidations, i.e., for increasing the net orderly liquidation value (NOLV) of retail stores, with a focus on liquidations conducted by asset disposition firms. The method comprises a dynamic program that informs markdown, inventory, and store closing decisions as well as a demand forecasting model. In each of three recent applications, the authors show that their method provided a significant improvement over prior practice. Closed for comment; 0 Comments.

When Supply-Chain Disruptions Matter

Disruptions to a firm's operations and supply chain can be costly to the firm and its investors. Many companies have been subjected to such disruptions, and the impact on company value varies widely. Do disruption and firm characteristics systematically influence the impact? In this paper, the authors identify factors that cause some disruptions to be more damaging to firm value than others. Insight into this issue can help managers identify exposures and target risk-mitigation efforts. Such insights will also help investors determine whether a company is exposed to more damaging disruptions. Key concepts include: The type of disruption matters in identifying the magnitude of a disruption's impact on a firm's share price. Disruptions attributed to factors within the firm or its supply chain are far more damaging than disruptions attributed to external factors. A higher rate of improvement in operating performance aggravates the impact of internal disruptions but not external disruptions. Management should be prudent about decisions to streamline operations and to reduce buffers and excess capacity. Some efficiency improvements may be attractive during periods of relative operational stability, but firms with high rates of improvement in operational performance could face distressing reductions in market value if they subsequently experience an internal disruption. Closed for comment; 0 Comments.

Signaling to Partially Informed Investors in the Newsvendor Model

Why might firms make operational decisions that purposefully do not maximize expected profits? This model looks at the question by developing scenarios using the example of inventory management in the face of an external investor. The research was conducted by Vishal Gaur of Cornell University, Richard Lai of the University of Pennsylvania, and Ananth Raman and William Schmidt of Harvard Business School. Key concepts include: Companies face pressure from external investors that leads them to make suboptimal operations decisions. This pressure arises from three forces: a strong prior belief that firms are of a "low" type (one with a low quality investment opportunity), an inability for firms to mitigate the information asymmetry regarding their actual type, and an emphasis on short-term valuation. Surprisingly, this scenario includes instances in which a firm with a high quality investment opportunity finds it attractive to underinvest. There have been relatively few applications of signaling games in the operations management literature and this model provides an important application of signaling game theory to the problem of inventory management in the face of an external investor. The researchers find several real-life examples in which firms faced pressure to underinvest, and how the firms chose to deal with those situations. One example is the decision by French upscale beauty brand Clarins Group to go private in 2008. The move relieved management of shareholder pressure for short-term profits and allowed them to pursue longer-term opportunities that eventually paid off. The model can be effectively applied regardless of whether the decision is about inventory or some other type of capacity investment, including plant expansions, capital expenditures, and contracting for production inputs. Closed for comment; 0 Comments.

The Impact of Supply Learning on Customer Demand: Model and Estimation Methodology

"Supply learning" is the process by which customers predict a company's ability to fulfill product orders in the future using information about how well the company fulfilled orders in the past. A new paper investigates how and whether a customer's assumptions about future supplier performance will affect the likelihood that the customer will order from that supplier in the future. Research, based on data from apparel manufacturer Hugo Boss, was conducted by Nathan Craig and Ananth Raman of Harvard Business School, and Nicole DeHoratius of the University of Portland. Key concepts include: Two key measures of supplier performance include "consistency", which is the likelihood that a company will continue to keep items in stock and meet demand, and "recovery", which is the likelihood that a company will deliver on time in spite of past stock-outs. Improvements in consistency and recovery are associated with increases in orders from retail customers. Increasing the level of service may lead to an increase in orders, even when the service level is already nearly perfect. Closed for comment; 0 Comments.

Incorporating Price and Inventory Endogeneity in Firm-Level Sales Forecasting

Benchmarking and forecasting firm level performance are key activities for both managers and investors. Retailer performance can be tracked using a number of metrics including sales, inventory, and gross margin. For operational reasons, the sales, inventory, and gross margin for a retailer are interrelated. Retailers often use inventory and margin to increase sales; and sales, conversely, provide input to the retailer’s decisions on inventory and margins. Inventory and margin also influence each other. This research uses firm-level annual and quarterly data for a large cross-section of U.S. retailers listed on NYSE, AMEX, or NASDAQ to construct a model that examines the interrelationships among sales per store, inventory per store, and margin. Key concepts include: This model can be used to benchmark retailers' performance in sales, inventory, and gross margin simultaneously. The model can also be used to generate sales forecasts even when sales were managed using inventory and gross margin. Closed for comment; 0 Comments.