What Happens When Wal‐Mart Comes to Town: An Empirical Analysis of the Discount Retailing Industry

In the past few decades multistore retailers, especially those with 100 or more stores, have experienced substantial growth. At the same time, there is widely reported public outcry over the impact of these chain stores on other retailers and local communities. This paper develops an empirical model to assess the impact of chain stores on other discount retailers and to quantify the size of the scale economies within a chain. The model has two key features. First, it allows for flexible competition patterns among all players. Second, for chains, it incorporates the scale economies that arise from operating multiple stores in nearby regions. In doing so, the model relaxes the commonly used assumption that entry in different markets is independent. The lattice theory is exploited to solve this complicated entry game among chains and other discount retailers in a large number of markets. It is found that the negative impact of Kmart's presence on Wal‐Mart's profit was much stronger in 1988 than in 1997, while the opposite is true for the effect of Wal‐Mart's presence on Kmart's profit. Having a chain store in a market makes roughly 50% of the discount stores unprofitable. Wal‐Mart's expansion from the late 1980s to the late 1990s explains about 40–50% of the net change in the number of small discount stores and 30–40% for all other discount stores. Scale economies were important for Wal‐Mart, but less so for Kmart, and the magnitude did not grow proportionately with the chains' sizes.     

David v. Goliath: A Brief Assessment of the U.S. Supreme Court's 2011 Ruling Denying Class Certification in Dukes v. Wal‐Mart

In 2001, Betty Dukes, then a 54‐year‐old African American, filed suit against her employer, Wal‐Mart, alleging that she had been the victim of gender discrimination. Ms. Dukes alleged that Wal‐Mart, the nation's largest private employer, routinely paid women less than men for comparable work and arbitrarily favored men over women in promotion decisions. In 2004, a U.S. District Court entered an order granting class certification, potentially extending the retailer's financial liability to thousands of current and past Wal‐Mart employees. At that time, the Wal‐Mart suit was the largest class action lawsuit ever approved in the United States. In 2011, the U.S. Supreme Court reversed the lower court's ruling. Writing for the majority, Justice Scalia cited Wal‐Mart's long‐standing explicit gender‐neutral employment policy and the decentralized manner in which local managers have discretion to adjust salaries and recommend applicants for promotion—factors that led the majority to question “the glue” binding the class together. Proponents of the Court's decision hailed the ruling as a victory for business and a step in the direction of needed legal reform. Critics viewed the decision as another in a series of defeats for minority interests by a pro‐business, ideologically divided Court. Did the Court get it right, or is this yet another example of might defeating right?     

Risk Pooling Advantages of Manufacturing Network Configuration

The decision of a firm to set up a plant network is influenced by a number of factors, including demand fluctuations across its portfolio of products, logistics costs, and service level requirements. Product plant networks offer the benefits of consolidated production and reduced transshipment costs; on the other hand, process plant networks allow intensive dedication to process expertise and economies of scale. In this paper, we show that, aside from these benefits, process plant networks offer significant risk pooling advantages under a wide range of conditions. We analytically demonstrate that, even without accounting for economies of scale advantages, firms may prefer the process plant network configuration due to the risk pooling benefits offered.     

STOCK LEVELS AND DELIVERY RATES IN VENDORMANAGED INVENTORY PROGRAMS

Using the latest information technology, powerful retailers like Wal‐Mart have taken the lead in forging shorter replenishment‐cycles, automated supply systems with suppliers. With the objective to reduce cost, these retailers are directing suppliers to take full responsibility for managing stocks and deliveries. Suppliers' performance is measured according to how often inventory is shipped to the retailer, and how often customers are unable to purchase the product because it is out of stock. This emerging trend also implies that suppliers are absorbing a large part of the inventory and delivery costs and, therefore, must plan delivery programs including delivery frequency to ensure that the inherent costs are minimized. With the idea to incorporate this shift in focus, this paper looks at the problem facing the supplier who wants quicker replenishment at lower cost. In particular, we present a model that seeks the best trade‐off among inventory investment, delivery rates, and permitting shortages to occur, given some random demand pattern for the product. The process generating demand consists of two components: one is deterministic and the other is random. The random part is assumed to follow a compound Poisson process. Furthermore, we assume that the supplier may fail to meet uniform shipping schedules, and, therefore, uncertainty is present in delivery times. The solution to this transportationinventory problem requires determining jointly delivery rates and stock levels that will minimize transportation, inventory, and shortage costs. Several numerical results are presented to give a feel of the optimal policy's general behavior.     

Lead Time Management through Expediting in a Continuous Review Inventory System

We consider a continuous review inventory system where delivery lead times can be managed by expediting in‐transit orders shipped from the supplier. First, we propose an ordering/expediting policy and derive expressions for evaluating the operating characteristics of such systems. Second, using extensive numerical experiments, we quantify the benefits of such an expediting policy. Third, we investigate a number of managerial issues. Specifically, we analyze the impact of the number of expediting hubs and their locations along the shipment network on the performance of such systems and offer insights into the design of the shipment network. We show (i) a single expediting hub that is optimally located in a shipment network can capture the majority of cost savings achieved by a multi‐hub system, especially when expediting cost is not low or demand variability is not high; (ii) when expediting time is proportional to the time to destination, for small‐enough or large‐enough demand variations, a single expediting hub located in the middle of the shipment network can capture the majority of cost savings of an optimally located hub; and (iii) in general, hubs close to the retailer significantly drive down costs, whereas hubs close to the supplier may not offer much cost savings.     

Multiple Identities and Work Motivation: The Role of Perceived Compatibility between Nested Organizational Units*

This study examines the role of perceived compatibility between nested organizational units in identification and work motivation. A survey was conducted in German pharmaceutical stores that had joined a large cooperative network several months before the investigation. Employees judged how compatible the network was with their individual stores on four dimensions (ensuring future, preserving tradition, preserving distinctiveness, and maintaining autonomy). Further, employees indicated their identifications with store and network and their intentions to exert effort on behalf of these units (store motivation and network motivation, respectively). As predicted, perceived compatibility correlated positively with both network identification and network motivation. It also moderated the correlations between store identification and network identification as well as between store motivation and network motivation. Several underlying mechanisms are discussed (e.g. evaluation of store and network, social projection). Overall, perceived compatibility between organizational units appears to be a crucial but under‐researched factor affecting identification and motivation at work.     

Optimal Configuration of a Service Delivery Network: An Application to a Financial Services Provider

Driven by market pressures, financial service firms are increasingly partnering with independent vendors to create service networks that deliver greater profits while ensuring high service quality. In the management of call center networks, these partnerships are common and form an integral part of the customer care and marketing strategies in the financial services industry. For a financial services firm, configuring such a call center service network entails determining which partners to select and how to distribute service requests among vendors, while incorporating their capabilities, costs, and revenue‐generating abilities. Motivated by a problem facing a Fortune 500 financial services provider, we develop and apply a novel mixed integer programming model for the service network configuration problem. Our tactical decision support model effectively accounts for the firm's costs by capturing the impact of service requirements on vendor staffing levels and seat requirements, and permits imposing call routing preferences and auxiliary service costs. We implemented the model and applied it to data from an industry partner. Results suggest that our approach can generate considerable cost savings and substantial additional revenues, while ensuring high service quality. Results based on test instances demonstrate similar savings and outperform two rule‐based methods for vendor assignment.     

Demand Forecast Sharing in Supply Chains

This paper examines the incentives of a manufacturer and a retailer to share their demand forecasts. The demand at the retailer is a linearly decreasing function of price. The manufacturer sets the wholesale price first, and the retailer sets the retail price after observing the wholesale price. Both players set their prices based on their forecasts of demand. In the make‐to‐order scenario, the manufacturer sets the production quantity after observing the actual demand; in the make‐to‐stock scenario, the manufacturer sets the production quantity before the demand is realized. In the make‐to‐order scenario, we show that sharing the forecast unconditionally by the retailer with the manufacturer benefits the manufacturer but hurts the retailer. We also demonstrate that a side payment contract cannot induce Pareto‐optimal information sharing equilibrium, but a discount based wholesale price contract can. The social welfare as well as consumer surplus is higher under the discount contract, compared with under no information sharing. In the make‐to‐stock scenario, the manufacturer realizes additional benefits in the form of savings in inventory holding and shortage costs when forecasts are shared. If the savings from inventory holding and shortage costs because of information sharing are sufficiently high, then a side payment contract that induces Pareto‐optimal information sharing is feasible in the make‐to‐stock scenario. We also provide additional managerial insights with the help of a computational study.     

Integrated Procurement Planning in Multi‐division Firms

For large multi‐division firms, coordinating procurement policies across multiple divisions to leverage volume discounts from suppliers based on firm‐wide purchasing power can yield millions of dollars of savings in procurement costs. Coordinated procurement entails deciding which suppliers to use to meet each division's purchasing needs and sourcing preferences so as to minimize overall purchasing, logistics, and operational costs. Motivated by this tactical procurement planning problem facing a large industrial products manufacturer, we propose an integrated optimization model that simultaneously considers both firm‐wide volume discounts and divisional ordering and inventory costs. To effectively solve this large‐scale integer program, we develop and apply a tailored solution approach that exploits the problem structure to generate tight bounds. We identify several classes of valid inequalities to strengthen the linear programming relaxation, establish polyhedral properties of these inequalities, and develop both a cutting‐plane method and a sequential rounding heuristic procedure. Extensive computational tests for realistic problems demonstrate that our integrated sourcing model and solution method are effective and can provide significant economic benefits. The integrated approach yields average savings of 7.5% in total procurement costs compared to autonomous divisional policies, and our algorithm generates near‐optimal solutions (within 0.75% of optimality) within reasonable computational time.     

The Retail Space‐Exchange Problem with Pricing and Space Allocation Decisions

We consider retail space‐exchange problems where two retailers exchange shelf space to increase accessibility to more of their consumers in more locations without opening new stores. Using the Hotelling model, we find two retailers’ optimal prices, given their host and guest space in two stores under the space‐exchange strategy. Next, using the optimal space‐dependent prices, we analyze a non‐cooperative game, where each retailer makes a space allocation decision for the retailer's own store. We show that the two retailers will implement such a strategy in the game, if and only if their stores are large enough to serve more than one‐half of their consumers. Nash equilibrium for the game exists, and its value depends on consumers’ utilities and trip costs as well as the total available space in each retailer's store. Moreover, as a result of the space‐exchange strategy, each retailer's prices in two stores are both higher than the retailer's price before the space exchange, but they may or may not be identical.     

Replenishment Strategies for Micro‐Retailers in Developing Countries

When formal distribution channels are absent in developing countries, micro‐retailers travel a long distance to replenish their stocks directly from suppliers. This “informal” replenishment strategy is inefficient due to high imputed travel costs involved in the replenishment process. To improve efficiency, one “hybrid” replenishment strategy has emerged under which one of the micro‐retailers in a neighborhood, while continuing its own retail business, also operates as a wholesaler to serve other micro‐retailers in the neighborhood. A major obstacle for the transition from the informal strategy to the hybrid strategy is that the micro‐retailers are reluctant to source from a wholesaler who also competes with them in the retail market. Thus, it is not clear when the micro‐retailers adopt the hybrid strategy instead of the informal strategy. Meanwhile, the micro‐retailers may prefer the “formal” strategy: a traditional replenishment strategy under which one of the micro‐retailers relinquishes its retail business and operates purely as a wholesaler. We examine a situation when competing micro‐retailers contemplate with the three potential aforementioned replenishment strategies. Our equilibrium analysis of the two‐store model reveals that the dominant strategy is: (a) the hybrid strategy when the travel cost is high; (b) the formal strategy when the travel cost is medium; and (c) the informal strategy when the travel cost is low. This key insight is shown continue to hold when we extend the two‐store model to incorporate other issues including: quantity discounts from the supplier, variable operating costs, price competition, local monopolies, and different decision sequences. One additional finding is that the transition from the informal strategy to the hybrid strategy could benefit consumers if the micro‐retailers receive quantity discounts from the supplier. Furthermore, when there are more than two stores, we show that the formal strategy is never dominant. Moreover, when the number of stores increases, the hybrid strategy becomes more preferable to the informal strategy.     

面向新零售的生鲜连锁企业城市配送网络优化研究

城市配送网络优化是生鲜连锁经营企业实施新零售的关键环节,本文研究新零售背景下生鲜企业城市配送网络面临的多业态门店选址及末端需求点分配问题。本文系统考虑多业态零售门店选址布局及覆盖范围、冷链设施配置、冷藏品类选择等生鲜新零售特征构建非线性混合整数规划模型,并设计混合拉格朗日松弛算法求解模型,通过与CPLEX对比验证本文算法的有效性。根据典型生鲜连锁企业重庆果琳的实际数据,运用本文模型及算法得到重庆果琳多业态零售门店布局、门店线上订单覆盖范围、门店冷藏最优品类和门店冷链设施配置方案,并探讨需求规模变动、消费者自提意愿、线上订单规模和气温变化等因素对城市配送系统的影响。结果发现相比重庆果琳现有配送网络,优化方案平均成本降低2.52%;生鲜连锁企业损耗成本占总成本超过70%,配置冷链设施总成本仅降低0.32%;需求规模变动对城市配送网络及单位配送成本的影响较小;消费者自提意愿、线上订单规模和气温变化不影响城市配送网络结构且对总成本影响较小。     

Tax and Education Policy in a Heterogeneous‐Agent Economy: What Levels of Redistribution Maximize Growth and Efficiency?

This paper studies the effects of progressive income taxes and education finance in a dynamic heterogeneous‐agent economy. Such redistributive policies entail distortions to labor supply and savings, but also serve as partial substitutes for missing credit and insurance markets. The resulting tradeoffs for growth and efficiency are explored, both theoretically and quantitatively, in a model that yields complete analytical solutions. Progressive education finance always leads to higher income growth than taxes and transfers, but at the cost of lower insurance. Overall efficiency is assessed using a new measure that properly reflects aggregate resources and idiosyncratic risks but, unlike a standard social welfare function, does not reward equality per se. Simulations using empirical parameter estimates show that the efficiency costs and benefits of redistribution are generally of the same order of magnitude, resulting in plausible values for the optimal rates. Aggregate income and aggregate welfare provide only crude lower and upper bounds around the true efficiency tradeoff.     

网络商店与社区便利店的商品虚拟展示合作研究

基于消费者效用理论，考虑网络商店在社区便利店内虚拟展示商品，实施商品种类合作的策略，分析了虚拟展示合作对双方决策以及市场均衡和利润的影响。研究结果表明，虚拟展示增加了社区便利店的商品多样性，促进了零售价格的增长，但虚拟展示商品和社区便利店内实物商品的竞争导致社区便利店利润降低，使得社区便利店缺乏主动参与合作的动机。基于纳什讨价还价模型，构建了基于平均主义的利润分成协调机制，实现了社区便利店和网络商店的商品虚拟展示合作，改善了参与双方的利润。     

基于供应链收益共享契约的格子铺经营机制优化分析

格子铺经营模式已引起理论者和实践者广泛关注.针对格子铺经营模式的合作问题,在努力因素影响需求的市场环境里,基于供应链视角,通过建模与优化,分析了节点企业的决策特征与策略选择,讨论了收益共享机制对格子铺经营模式的影响,研究表明单纯的收益共享机制,无法实现格子铺经营模式的整体绩效最优(即由格主、铺主参与的供应链合作机制的协调),不能够改善格子铺合作；当对租金收取机制进行调整,使其为促销、广告投入的一定比例时,收益共享机制可以实现合作的协调,进而达到改善格子铺经营的目的.     

Public Perceptions of Regulatory Costs,Their Uncertainty and Interindividual Distribution

Public perceptions of both risks and regulatory costs shape rational regulatory choices. Despite decades of risk perception studies, this article is the first on regulatory cost perceptions. A survey of 744 U.S. residents probed: (1) How knowledgeable are laypeople about regulatory costs incurred to reduce risks? (2) Do laypeople see official estimates of cost and benefit (lives saved) as accurate? (3) (How) do preferences for hypothetical regulations change when mean‐preserving spreads of uncertainty replace certain cost or benefit? and (4) (How) do preferences change when unequal interindividual distributions of hypothetical regulatory costs replace equal distributions? Respondents overestimated costs of regulatory compliance, while assuming agencies underestimate costs. Most assumed agency estimates of benefits are accurate; a third believed both cost and benefit estimates are accurate. Cost and benefit estimates presented without uncertainty were slightly preferred to those surrounded by “narrow uncertainty” (a range of costs or lives entirely within a personally‐calibrated zone without clear acceptance or rejection of tradeoffs). Certain estimates were more preferred than “wide uncertainty” (a range of agency estimates extending beyond these personal bounds, thus posing a gamble between favored and unacceptable tradeoffs), particularly for costs as opposed to benefits (but even for costs a quarter of respondents preferred wide uncertainty to certainty). Agency‐acknowledged uncertainty in general elicited mixed judgments of honesty and trustworthiness. People preferred egalitarian distributions of regulatory costs, despite skewed actual cost distributions, and preferred progressive cost distributions (the rich pay a greater than proportional share) to regressive ones. Efficient and socially responsive regulations require disclosure of much more information about regulatory costs and risks.     

An Information‐Processing Approach for Evaluating In‐Store Retail Operational Design Strategies

We develop a model to evaluate retail store operational design strategies using an information‐processing perspective of organizational design. We propose that three model constructs pertaining to in‐store shopper task uncertainty—the product mix complexity, the service production complexity, and the product mix changeover—create shopper encounter information requirements (IR). These requirements can be met using specific retail service operational design choices for managing shopper encounters, namely, designing layouts for self‐service (SS) and providing employees with task empowerment (TE). The model is then operationalized using a two‐stage approach to develop new multi‐item, measurement scales. The psychometric properties and predictive validity of the scales and model are then confirmed by using structural equation modeling with survey data from 175 merchandise retail store managers. We find that our model can be generically applied across the retail industry to understand how shopper encounter IR motivate retailer store design choices and can be used to determine whether to design stores for SS or to provide store employees with TE. We then evaluate the efficacy of the studied store design choices on customer delivery satisfaction, and offer some suggestions for future research.     

Estimating the Impact of Understaffing on Sales and Profitability in Retail Stores

In this study, we use hourly data on store traffic, sales, and labor from 41 stores of a large retail chain to identify the extent of understaffing in retail stores and quantify its impact on sales and profitability. Using an empirical model motivated from queueing theory, we calculate the benchmark staffing level for each store, and establish the presence of systematic understaffing during peak hours. We find that all 41 stores in our sample are systematically understaffed during a 3‐hour peak period. Eliminating understaffing in these stores can result in a significant increase in sales and profitability in these stores. Also, we examine the extent to which forecasting errors and scheduling constraints drive understaffing in retail stores and quantify their relative impacts on store profits for the retailer in our study.     

Catastrophe Risk Models for Evaluating Disaster Risk Reduction Investments in Developing Countries

Major natural disasters in recent years have had high human and economic costs, and triggered record high postdisaster relief from governments and international donors. Given the current economic situation worldwide, selecting the most effective disaster risk reduction (DRR) measures is critical. This is especially the case for low‐ and middle‐income countries, which have suffered disproportionally more economic and human losses from disasters. This article discusses a methodology that makes use of advanced probabilistic catastrophe models to estimate benefits of DRR measures. We apply such newly developed models to generate estimates for hurricane risk on residential structures on the island of St. Lucia, and earthquake risk on residential structures in Istanbul, Turkey, as two illustrative case studies. The costs and economic benefits for selected risk reduction measures are estimated taking account of hazard, exposure, and vulnerability. We conclude by emphasizing the advantages and challenges of catastrophe model‐based cost‐benefit analyses for DRR in developing countries.     

基于供应链收益共享契约的格子铺经营机制优化分析

格子铺经营模式已引起理论者和实践者广泛关注。针对格子铺经营模式的合作问题,在努力因素影响需求的市场环境里,基于供应链视角,通过建模与优化,分析了节点企业的决策特征与策略选择,讨论了收益共享机制对格子铺经营模式的影响,研究表明单纯的收益共享机制,无法实现格子铺经营模式的整体绩效最优(即由格主、铺主参与的供应链合作机制的协调),不能够改善格子铺合作;当对租金收取机制进行调整,使其为促销、广告投入的一定比例时,收益共享机制可以实现合作的协调,进而达到改善格子铺经营的目的。