David Simchi-Levi (Massachusetts Institute of Technology, USA)
Short Biography
David
Simchi-Levi is a professor of Engineering Systems at Massachusetts Institute of
Technology. His research currently focuses on developing and implementing robust
and efficient techniques for manufacturing and supply chains. He has published
widely in professional journals on both practical and theoretical aspects of
supply chain management. He is the Editor-in-Chief of Operations Research,
the flagship journal of INFORMS, the former Editor-in-Chief of Naval Research
Logistics and a member of the board
for several scientific journals.
His Ph.D. students have accepted positions in leading academic institutes
including
Professor
Simchi-Levi has been the principal investigator for more than seven million
dollars in funded academic research. Recently, the National Aeronautics &
Astronautics Administration (NASA) has awarded him (and a colleague, Professor
Oli de Weck) a grant to create a framework for analysis and strategic planning
of the future interplanetary supply chain. Exploration even on Earth is
crucially dependent on a robust, yet flexible and affordable supply of
propellant, crew consumables, scientific instruments and spares among others.
Professor
Simchi-Levi is the co-author (with Julien Bramel) of The
Logic of Logistics, published by Springer in 1997; 2nd Edition
appeared in October 2004. His book, Designing
and Managing the Supply Chain (with P. Kaminsky and E. Simchi-Levi) was
published by McGraw-Hill in August 1999, 2nd Edition appeared in
October 2002. The book received the Book-of-the-year award and the Outstanding
IIE Publication award given in 2000 by the Institute
of Industrial Engineers, and the Outstanding
First Edition of the Year award given in 2000 by McGraw-Hill.
The book was also selected by Business
2.0,
December 2001 issue, as the best source
for slashing time and cost and increasing productivity in the supply chain.
The book has been translated to Chinese, Japanese, Korean and Portuguese. His
third book, Managing the Supply
Chain (with P. Kaminsky and
E. Simchi-Levi) was published by McGraw-Hill in December 2003.
Professor Simchi-Levi has consulted and collaborated extensively with private and public organizations. He is the founder and chairman of LogicTools (www.logic-tools.com) which provides software solutions and professional services for supply chain planning. These solutions have been used widely to reduce cost and improve service level in large-scale supply chains. Clients include Colgate-Palmolive, ConAgra, Del Monte, Kraft Foods, Ryder, SC Johnson, UPS, US Postal Service, Walgreens, and Weyehaeuser to name a few.
Lecture to be presented in EWI 2007
Title
Risk
Aversion in Inventory Management
Abstract
Traditional inventory models focus on risk-neutral decision makers, i.e., characterizing replenishment strategies that maximize expected total profit, or equivalently, minimize expected total cost over a planning horizon. In this paper, we propose a framework for incorporating risk aversion in multi-period inventory models as well as multi-period models that coordinate inventory and pricing strategies. In each case, we characterize the optimal policy for various measures of risk that have been commonly used in the finance literature. In particular, we show that the structure of the optimal policy for a decision maker with exponential utility functions is almost identical to the structure of the optimal risk-neutral inventory (and pricing) policies. These structural results are extended to models in which the decision maker has access to a (partially) complete financial market and can hedge its operational risk through trading financial securities. Computational results demonstrate the importance of this approach not only to risk-averse decision makers, but also to risk-neutral decision makers with limited information on the demand distribution.