Summer 2009

The business-to-business (B2B) landscape is littered with a vast array of manufacturers, distributors and service providers. Each one, unique in its own way, has a process to create pricing for the organization. At one company, a new salesperson makes a gut-feel estimate of how much to increase the price of a high-visibility item. In another, a staff of scientists uses analytics, data mining and science to price all aspects of the business. Every company has its own story and its own place on the evolutionary path of pricing. Each step of the way provides new insights, new ways of doing business and a clear, measurable increase in revenue and profit dollars.

• Neil Biehn

By most assessments, the change in the U.S. approach in Iraq, beginning in late 2006, has largely succeeded, after previous efforts seemed doomed to fail. More than just a change of troop levels, more even than a change of strategy and resources and a willingness to buy off opponents rather than confronting them, however, “the surge” was a change in how the U. S. military functions as a learning organization. Among the differences are how leaders are selected and evaluated, how military doctrine connects to civilian activity, how the military interacts with the civilian leadership, and how decisions are made. What the key military leaders did reflects recent results from organization science and OR/MS, and the lessons they learned will, in turn, further advance understanding of how organizations function. In cognitive science terms, they didn’t just develop a different set of rules, they developed a different way of generating rules.

• Doug Samuelson

Handling uncertainty represents the most significant need in converting quantitative insight into profitable action. Yet, explicitly incorporating uncertainty into analytics continues to present theoretical and practical challenges. Because computational results are tied so closely to model inputs, stochastic approaches require the modeler to make strong, sometime unwarranted, assumptions on key inputs such as probability distributions. When such assumptions are challenged by subject-matter experts and end-users, it is difficult to reanalyze and regroup because stochastic methods are typically computationally intensive.

• Sanjay Saigal

Multi-criteria decision analysis (MCDA) has proven to be a sound technique to solve complex problems where numerous available options must be evaluated against multiple criteria. This includes, for example, selecting a best project against many others or choosing the most efficient portfolio of investments. Apart from those traditional applications, more recent uses of MCDA have been developed to solve strategic problems, incorporating MCDA in the evaluation phase of scenario planning for example. These strategic uses of MCDA often consist of four basic steps: identifying the decision-maker’s strategic objectives; evaluating the performance of each strategy-scenario on each objective; weighting the strategic objectives and; obtaining the overall performance of each strategy scenario.

• Santiago Castro

Seven is a number that appears many places in nature, music and religion. There are seven oceans, seven continents, seven notes on the musical scale, seven days of the week and many other “sevens.” In this article, we will discuss major mistakes; we call them the “seven sins of simulation” to which many simulation practitioners fall prey. Certainly, there could be more, and others may find different ones than those we cite here.

• Jerry Banks
• Randall Gibson

THEY SAY THAT variety is the spice of life, but don’t tell that to Hewlett-Packard, whose abundance of product variety bumped up revenues but also gave the world’s largest technology company a serious case of indigestion that ultimately and negatively impacted its bottom line.

• Peter Horner

While the Edelman Award from the Institute of Operations Research and the Management Sciences (INFORMS) each year honors an outstanding example of analytics and operations research in practice, the INFORMS Prize salutes organizations for “sustained integration of operations research.” The INFORMS Prize Committee looks for a variety of applications of O.R. in a single organization that provides the organization with a competitive advantage through high impact work.