"Pre‑IPO Operational and Financial
Decisions", with M. J. Sobel,
Management Science, 50(7), July 2004, pp. 935 - 948
Abstract:
Many owners of growing privately-held firms make operational and financial
decisions in an effort to maximize the expected present value of the proceeds
from an Initial Public Offering (IPO). We ask: "What is the right time to make
an IPO?" and "How should operational and financial decisions be coordinated to
increase the likelihood of a successful IPO?" Financial and operational
decisions in this problem are linked because adequate financial capital is
crucial for operational decisions to be feasible and operational decisions
affect the firm’s access to financial resources. The IPO event is treated as a
stopping time in an infinite-horizon discounted Markov decision process.
Unlike traditional stopping time models, at every stage the model includes
other decisions such as production, sales and loan size. The results include
(1) characterization of an optimal capacity-expansion policy, (2) sufficient
conditions for a monotone threshold rule to yield an optimal IPO decision, and
(3) algorithmic implications of results in (1) and (2)
"Competition and
Diversification Effects in Supply Chains with Supplier Default Risk?" with P. H. Ritchken and A. N. Burnetas,
Manufacturing & Service Operations Management, 9 (2), Spring 2007,
123 - 146
Abstract:
We study the effects of disruption risk in a supply chain where one retailer
deals with competing risky suppliers who may default during their production
lead-times. The suppliers, who compete for business with the retailer by
establishing wholesale prices, are leaders in a Stackelberg game with the
retailer. The retailer, facing uncertain future demand, chooses order
quantities while weighing the benefits of procuring from the cheapest supplier
against the advantages of order diversification. For the model with two
suppliers we show that low supplier default correlations dampens competition
among the suppliers, increasing the equilibrium wholesale prices. Therefore,
the retailer prefers suppliers with highly correlated default events, despite
the loss of diversification benefits. In contrast, the suppliers and the
channel prefer defaults that are negatively correlated. However, as the number
of suppliers increases our model predicts that the retailer may be able to
take advantage of both competition and diversification.
"Vulnerable Options in Supply Chains: Effect of the
Supplier Competition", Naval Research Logistics,53
(7), October2006, 656 - 673
Abstract:
Concerned with the risk of the supplier default, a firm may choose to
diversify its orders among multiple suppliers. Furthermore, the discrepancy in
production lead-times among suppliers furnishes a firm with a valuable option
to defer ordering decisions until uncertainty has been partially resolved.
The suppliers also have an option: to defer their pricing decisions. Using a
single-period, multi-stage model of a two-echelon supply chain with competing
risky suppliers and a single manufacturer, this paper investigates how the
supplier default risk and default co-dependence affect manufacturer
procurement and production decisions, supplier pricing decisions, firms
profits, and the deferment option value and how the introduction of the
deferment option alters supplier competition.
Abstract:
We study how supply risk, fixed supplier costs, financial constraints, and the
dual role played by suppliers as the providers of parts and the financiers
of the manufacturer affect the relationship among firms in a supply chain,
supplier selection, and supply chain performance. Using a one-period model,
we consider the joint procurement and financing decisions of a firm with
limited financial capital, facing either an uncertain demand or an uncertain
supply. We find the optimal financing decisions and characterize the optimal
operational decisions. Our analysis suggests that alternative financing
sources (internal financing and trade credit loans) are substitutable and
that the firm uses more suppliers if the internal financing is not
available. Surprisingly, we also find that the wholesale price and the fixed
cost of working with a supplier may affect the optimal number of suppliers
in a non-monotone way. These results are explained by considering tradeoffs
between the benefits of relaxing financing constraints and the costs of
working with additional suppliers. By studying the balance between the
expected profit and the value of the option to default, we explain the
effects of supply uncertainty on the shareholders' value and the optimal
decisions. Finally, we address the question of whether firms operating in
developing economies should contract with more suppliers than firms
operating in developed economies. The answer is “no” if the fixed cost of an
extra supplier is high. However, our model predicts that financial
constraints will force the firms in developing economies to suboptimal
levels of production and cause higher stock-out rates, which is consistent
with the results of earlier empirical studies.
Abstract:
The risk of supply disruptions due to suppliers' financial problems plays a
prominent role in manufacturers' risk portfolios. Even large suppliers (e.g.
Delphi) could file for bankruptcy, and manufacturer's actions, such as
financial subsidies to the suppliers, affect profoundly suppliers' financial
health. Using a dynamic, stochastic, periodic-review model of manufacturer's
joint capacity reservation and financial subsidy decisions and a firm-value
model of supplier's bankruptcy, we address the following questions: (1) How
can one model the supplier's financial state and its relationship to the
supplier's operational performance? (2) What are the operational benefits to
the manufacturer from giving financial subsidies to the supplier, and what
are the costs? (3) What is the optimal joint capacity ordering and financial
subsidy policy for the manufacturer? (4) Should a powerful manufacturer
share supply chain profits with a weaker supplier? We provide general
conditions that allow the manufacturer to make ordering decisions
independently from the subsidy decisions. In particular, to choose the
optimal order quantities in the dynamic newsvendor setting, the manufacturer
should use the newsvendor critical fractile expression. We provide
conditions for the optimal subsidy policy to have a "subsidize-up-to"
structure, perform comparative statics analysis, and describe conditions
when the manufacturer may choose to share supply chain profits with the
supplier.
Abstract: We study a manufacturer that faces a supplier privileged with private
information about supply disruptions. We investigate how
risk-management strategies of the manufacturer change, and examine whether
risk-management tools are more, or less, valuable, in the presence of such
asymmetric information. We model a supply chain with one manufacturer and
one supplier, in which the supplier's reliability is either high or low and
is the supplier's private information. Upon disruption the supplier chooses
between paying a penalty to the manufacturer for the shortfall and using
backup production to fill the manufacturer's order. Using mechanism design
theory, we derive the optimal contract menu offered by the manufacturer. We
find that information asymmetry may cause the less reliable supplier type to
stop using backup production while the more reliable supplier type continues
to use it. Additionally, the manufacturer may stop ordering from the less
reliable supplier type altogether. The value of backup production for the
manufacturer is not necessarily larger under symmetric information and, for
the more reliable supplier type, it could be negative. The manufacturer is
willing to pay the most for information when backup production is moderately
expensive. The value of information may increase as supplier types become
uniformly more reliable. Thus, higher reliability need not be a substitute
for better information.
"Supply Disruptions, Asymmetric
Information, and a Dual Sourcing Option", with Yang Z., G. Aydin,
D. Beil, in progress
"Design and Management of Franchise
Networks", with A. Waring, in progress
"Resilient Supply Chains and Dynamic
Oligopoly Models", with A. Wadecki, in progress
"Designing Resilient Supply Chains:
Diversification vs. Dedicated Supplier Procurement Strategies", in
progress
"Reduced-form Financial Defaults Models
and Supply Chain Networks", with M. Van Oyen and D. Williams, in
progress
"Inventory of Cash-Constrained Firms and
the Option to Acquire Future Financing", with P.-Y. Brunet, in
progress
"Investments, Hedging, and Frictions",
with J. Keppo and K. Muthuraman, in progress
"Mechanism Design and the Centralized
Solution for Supply Chain Problem", with S. Sharma, D. Teneketzis,
and M. Van Oyen, in progress
"The Effect of Bankruptcies on LBO
Decisions", with A. Wadecki, in progress
"Dealing with Supplier Bankruptcies: the Costs and
Benefits of Financial Subsidies",
Financial Engineering Seminar, University of
Michigan, Ann Arbor, MI -- March 2007; Mini-conference on the Integrated
Risk Management in Operations and Global Supply Chain Management, St. Louis,
MO -- June 2007; MSOM Conference, Beijing, China -- June 2007
"Dealing with Supplier Bankruptcies: Financial
Subsidies, Competition, and Asymmetric Information", Workshop
on Frontiers of Research in Supply Chain
Management, Beijing, China -- June 2007
"Supply Risk, Asymmetric Information, and Backup
Production Option", Socio-Technical
Infrastructure for Electronic Transactions (STIET) Seminar, University of
Michigan, Ann Arbor, MI -- February
2007; University of Iowa -- March 2007
"Dealing with Supplier Bankruptcies: the Benefits of
Diversification and the Costs of Financial Subsidies", OlinSchool of Business. WashingtonUniversity
in St. Louis, St. LouisMO
— August 2006
"Resilient Supply Chains: Supplier Bankruptcies and
Financial Subsidies",
INFORMS Conference (invited session), Pittsburgh, PA
— November 2006
"Designing Resilient Supply
Chains: Diversification vs. Dedicated Supplier Procurement Strategies",
Invited Session at INFORMS Conference, San Francisco, CA -- November 2005;
MSOM Conference, Atlanta, GA -- June 2005
"Resilient Supply Chains: Benefits of Diversification and Vulnerable
Deferment Options in the Presence of Competition", Mini-conference on the
Integrated Risk Management in Operations and Global Supply Chain Management,
St. Louis, MO -- June 2005
"Risk,
Financing and the Optimal Number of Suppliers", NSF Workshop on Supply Chain
Management, Cocoa Beach, FL; Ford Motor Company; MSOM Conference, Evanston,
IL; Applied Probability Society Conference, Montreal, CA; Invited session at
INFORMS Conference, San Francisco, CA -- November 2005;
IFOM, Pittsburgh, PA — August 2006; Krannert
School of Management, Purdue University,West Lafayette, IN — November 2006
Discussant for "Optimal
Control and Hedging of Operations in the Presence of the Financial Markets"
by Rene Caldentey and Martin Haugh at
the
mini-conference on the Integrated Risk Management in Operations and Global
Supply Chain Management, St. Loius, MO --
June 2004
"Vulnerable Deferment Options in
Supply Chains and Effects of Correlated Supplier Defaults", INFORMS
conference, Atlanta, GA -- October 2003; NSF Workshop on Supply Chain
Management, Gainesville, FL — February 2004; Real Options Conference,
Montreal, CA — June 2004;
"On Credit Risk in Supply
Chains: Is Negative Default Correlation Among Suppliers Desirable?"
INFORMS conference, Atlanta, GA -- October 2003
"Effects of Correlated Defaults
in Supply Chain", University of Michigan, Ann Arbor, MI; University of
Florida, Gainesville, FL; Purdue University, West Lafayette, IN; Auburn
University, Auburn, AL; Carnegie-Mellon University, Pittsburgh, PA; University
of Toronto, Toronto, CA; M&SOM conference, USC, Los Angeles, CA; Real Options
conference, Georgetown University, Washington, DC -- 2003
"Pre-IPO Operational and
Financial Decisions", INFORMS conference, San Jose, CA -- November 2002;
Northwestern University, Evanston IL -- December 2002
"Operational Decisions of the Pre-IPO firm", M&SOM conference, Cornell
University, Ithaca, New York -- June 2002
"Load Balancing using Dynamic
Programming", Penske Logistics, Beachwood, Ohio -- May 2001
"RouteAssist Functionality",
Penske Logistics, Beachwood, Ohio -- March 2001
"Common Carrier Analysis",
Penske Logistics, Beachwood, Ohio -- November 2000
"The Logic of RouteAssist",
Penske Logistics, Beachwood, Ohio -- October 2000
Logistics engineer at Penske Logistics, Beachwood, Ohio (full-time, July 2000 to
August 2001 and May 1999 to August 1999)
Database developer/Programmer at CWRUnet Services, Case Western Reserve
University, Cleveland, Ohio (full-time, Summer 1996, Summer 1997, and Summer
1998)
Programmer at Insurance Company "OMETA", Kiev, Ukraine (part-time February 1993
to August 1993)
Programmer at Data Processing Center of Systems Engineering Association, Kiev,
Ukraine (full-time -- Summer 1990 and Summer 1991)
"Supply Chain Management" (IOE
641), Department of Industrial and Operations Engineering, University of
Michigan -- Winter 2004, Winter
2005, Winter 2006, Winter 2007
Research in Supply Chain Management
course for Ph.D. students
"Derivative Instruments" (IOE
453), Department of Industrial and Operations Engineering, University of
Michigan -- Winter 2006, Winter 2007
Derivatives course for
undergraduate and graduate engineering students
"Corporate Finance" (IOE
452), Department of Industrial and Operations Engineering, University of
Michigan -- Fall 2003, Fall
2004, Fall 2005, Fall 2006, Fall 2007
Core Corporate Finance course for
undergraduate and graduate engineering students
Faculty
Co-Advisor for Tauber Institute projects
--
Summer 2004, Summer 2005, Summer 2007
Tauber Institute Team Projects are 14-week
multidisciplinary, collaborative internships during which students work on
manufacturing issues to potentially earn or save sponsoring companies millions
of dollars. TI teams are supported by University of Michigan faculty.
Advisors from both the College of Engineering and Business School - two leading
experts in their fields - oversee the projects and add their knowledge base.
Faculty advisors consult regularly with students and make on-site visits to
review their progress firsthand.
"Statistics Camp for MBA students",
Weatherhead School of Management, Case Western Reserve University -- Fall 2002,
Summer 2002, Spring 2002, and Spring 2000
Introduction to basic statistical
concepts for part-time MBA students
Facilitator in "Asset Pricing
seminar", Department of Operations, Case Western Reserve University -- Fall
2002 and Summer 2002
"Mathematical Foundations for
Advanced Studies", Department of Operations, Case Western Reserve University
-- Fall 2001
Review of mathematical proof
techniques and introduction to abstract mathematical reasoning for first year
Ph.D. students
"Mathematical Foundations of
Operations Research", Department of Operations, Case Western Reserve
University -- Fall 1999 and Fall 1998
Review of the concepts, techniques,
and applications of linear algebra and calculus for first year Ph.D. students
"Mathematics for Business and
Social Sciences I and II", Department of Mathematics, Case Western Reserve
University -- from 1995 to 1998
Core mathematics course for
undergraduate students in business and social sciences
"Algebra and Trigonometry",
Department of Mathematics, Case Western Reserve University -- Spring 1996
