Title: The Value of Partial Demand Visibility with CommitmentAbstract:
We investigate the value of short-term demand visibility in the decision process of selecting transportation procurement contracts with temporal commitment, a scenario motivated by industry. With new technological innovations, the temporal commitment of such contracts is shortening, adding more value to short-term demand visibility. In a single distribution lane, we show demand visibility fundamentally changes the contracting policies, increasing the decision-makers’ willingness to commit to contracts, adapting to observed demand, and coordinating the contracting epochs with expected demand shocks (such as Black Friday). Extending our results to a distribution network, we find demand visibility and flexible capacity are two hedging mechanisms against demand uncertainty for signing procurement contracts with temporal commitment. Previous studies show that, with long temporal commitment, the two mechanisms are substitutes. We show that commitment imposed across a few periods leads to new dynamics in which the two mechanisms act as complements. In contrast to conventional wisdom, when contracts have short commitments, companies have high incentives to combine flexible capacity and demand visibility against demand uncertainty.Bio:
Pol Boada-Collado is a 5th year Ph.D. candidate in the Department of Industrial Engineering and Management Sciences at Northwestern University, working with Karen Smilowitz and Sunil Chopra. Before his Ph.D., Pol worked as a research assistant at IESE Business School and as a data scientist in the Neuroscience Department of IDIBAPS (Barcelona). During his first summer at Northwestern, Pol did an internship as a supply chain consultant, an industry collaboration that has motivated his doctoral dissertation. His research studies how traditional supply chain models can become more nimble to adapt to market changes such as demand surges or customer behavior trends, with applications to retail and home delivery operations. His research has been published in Transportation Science and M&SOM and has been awarded the Nemhauser Prize for Best Paper. Pol received a Transportation Center Dissertation Year Fellowship and a McCormick Terminal Year Fellowship. Pol served as President and Treasurer of the Northwestern University INFORMS student chapter and received the IEMS Department Award for Exceptional Leadership and Service in recognition of these efforts.