Operations & Supply Chain Management

Creative destruction presents a tough implementation challenge. It's expensive in terms of physical goods and executive and employee time. Creatively destroying requires stopping all or part of the existing system, destroying it, redesigning the new system, putting it in place, debugging it, and habituating employees to its entirely new features. That means retraining and re-establishing informal networks among longstanding employees, customers, and new employees. Finally, it means creating a new culture and aligning people, processes, networks, and structures with it.

Most management advice today — whether it's from books or articles, prescribed in courses or by consultants — says that change is good and more change is better. Advice on how to change varies quite a bit, but it has three features in common: "Creative destruction" is its motto. "Change or perish" is its justification. And "No pain, no change" is its rationale for overcoming a purportedly innate human resistance to change. The overarching goal is to invent a spanking new future ahead of one's competitors.

Creative destruction tends to be a very disruptive and painful way of bringing about change — often so painful that it becomes virtually unsustainable. In many situations such highly destabilizing and painful changes can hurt more than they help. What is needed is a less disruptive approach to change — one that provides for a sustained series of successful changes, enabling firms to adapt to their ever-changing environments without being torn apart. An alternative to creative destruction called creative recombination is described.

This paper presents a financial statement analysis that distinguishes leverage that arises in financing activities from leverage that arises in operations. The analysis yields two leveraging equations, one for borrowing to finance operations and one for borrowing in the course of operations. These leveraging equations describe how the two types of leverage affect book rates of return on equity.

Many telephone call centers that experience cyclic and random customer demand adjust their staffing over the day in an attempt to provide a consistent target level of customer service. The standard and widely used staffing method, which we call the stationary independent period by period (SIPP) approach, divides the workday into planning periods and uses a series of stationary independent Erlang-c queuing models—one for each planning period—to estimate minimum staffing needs.

This paper considers pricing and capacity sizing decisions, in a single-class Markovian model motivated by communication and information services. The service provider is assumed to operate a finite set of processing resources that can be shared among users; however, this shared mode of operation results in a service-rate degradation. Users, in turn, are sensitive to the delay implied by the potential degradation in service rate, and to the usage fee charged for accessing the system.

For many years, average bed occupancy level has been the primary measure that has guided hospital bed capacity decisions at both policy and managerial levels. Even now, the common wisdom that there is an excess of beds nationally has been based on a federal target of 85% occupancy that was developed about 25 years ago. This paper examines data from New York sate and uses queueing analysis to estimate bed unavailability in intensive care units (ICUs) and obstetrics units. Using various patient delay standards, units that appear to have insufficient capacity are identified.

Revenue management (RM), refers to the collection of strategies and tactics by which airlines (and other transportation providers) manage demand for their services. This chapter surveys the method used to perform this demand management function. While revenue management today is applied in a wide range of industries, our focus here is on airline and other transportation RM problems. The chapter is based on excerpted material from our book The Theory and Practice of Revenue Management.