Effect of Quality Management Systems and Total Quality Management on Productivity Before and After: Empirical Evidence from the Indian Auto Component Industry

We study the linkages between firm‐level quality initiatives such as quality management systems (QMS) and total quality management (TQM) and output productivity in the Indian auto component industry. We use externally validated quality certification and quality awards as proxies for QMS and TQM, respectively, as it is difficult to directly measure the QMS and TQM efforts of firms. We use an unbalanced panel of 220 firms and a balanced panel of 73 firms from the Indian auto component industry over the period 1993–2006 to study these links. Both parametric as well as non‐parametric approaches are used, as appropriate, to measure the rate of change in productivity and the impact of quality initiatives on productivity change during this period. We determine the proportion of productivity resulting from technical change and relative efficiency change, thus providing insights into the structure of productivity improvements. We find that TQM efforts resulted in a high rate of productivity change (11%) in the award‐winning firms after the award. On the other hand, pre‐certification productivity change due to QMS was 5% and post‐certification change was 3.6%. In the periods prior to certification, productivity change was driven mainly by technical change; whereas the source of productivity change after certification is mixed. However, prior to awards, productivity change was driven mainly by relative efficiency change, whereas post‐award productivity change was due to technical change. The results suggest that management focus on attaining certification did generate conceptual learning (linked to technical change) during the period leading to certification, but these effects were not significant after certification. The results also suggest that the TQM programs generated significant productivity gains in the long run, although setting the associated systems in place did not result in significant productivity change prior to winning awards. Thus, the study provides direct but nuanced evidence linking quality certification as well as the adoption of TQM programs to the associated conceptual and operational learning processes and their impact on the change in productivity.     

Sales Forecasting with Financial Indicators and Experts' Input

We present a method for forecasting sales using financial market information and test this method on annual data for US public retailers. Our method is motivated by the permanent income hypothesis in economics, which states that the amount of consumer spending and the mix of spending between discretionary and necessity items depend on the returns achieved on equity portfolios held by consumers. Taking as input forecasts from other sources, such as equity analysts or time‐series models, we construct a market‐based forecast by augmenting the input forecast with one additional variable, lagged return on an aggregate financial market index. For this, we develop and estimate a martingale model of joint evolution of sales forecasts and the market index. We show that the market‐based forecast achieves an average 15% reduction in mean absolute percentage error compared with forecasts given by equity analysts at the same time instant on out‐of‐sample data. We extensively analyze the performance improvement using alternative model specifications and statistics. We also show that equity analysts do not incorporate lagged financial market returns in their forecasts. Our model yields correlation coefficients between retail sales and market returns for all firms in the data set. Besides forecasting, these results can be applied in risk management and hedging.     

Exponential models,brownian motion,and independence

Some examples of steep, reproductive exponential models are considered. These models are shown to possess a τ-parallel foliation in the terminology of Barndorff-Nielsen and Blaesild. The independence of certain functions follows directly from the foliation. Suppose X(t) is a Wiener process with drift where X(t) = W(t) + ct, 0 < t < T. Furthermore let Y = max [X(s), 0 < s < T]. The joint density of Y and X = X(T), the end value, is studied within the framework of an exponential model, and it is shown that Y(Y – X) is independent of X. It is further shown that Y(Y – X) suitably scaled has an exponential distribution. Further examples are considered by randomizing on T.     

Inventory Sharing in the Presence of Commodity Markets

This study investigates the value of inventory sharing in the presence of spot and forward markets. We consider a multi‐period setting where two firms process a common commodity to meet stochastic demands. They can buy and sell the commodity through both the spot and forward markets. They can also share the commodity if one has leftover inventory while the other has excess demand. We first characterize the equilibrium strategies of the two firms. Our analysis reveals that in such a context, the value of inventory sharing is low when the forward price is directly used to value the sharing transactions. We then develop a structured trans‐shipment price scheme that uses a linear combination of the spot and forward prices. We show that this method can substantially increase the value of inventory sharing. Our analysis also reveals that in the presence of liquid spot and forward markets, the value of inventory sharing mainly results from the difference of the transaction costs, and it increases if the market in which firms operate becomes more competitive.     

The perils of e‐mail communications in nonprofits

Nonprofits typically operate in a multicultural and global environment. Critical to their success is effective communications by their leaders. But effective communications is a challenge as e‐mail has become the medium of choice for communications among most nonprofit executives. Communicating with their culturally diverse stakeholders using the less personal medium of e‐mails could be jeopardized unless nonprofit executives consciously focus on how recipients might decode their message. By understanding the interactions of the linguistic, cultural, and social processes inherent in the encoding and decoding of communications, they can attenuate misunderstandings. Learning from a series of personal and damaging e‐mails experienced by one of the authors in a global nonprofit organization, the authors underline the need to be culturally sensitive in e‐mail communications in a multicultural organization. This article highlights the challenge faced by leaders and managers of nonprofits to be direct yet polite when not communicating face‐to‐face with their stakeholders.     

Capacity Allocation among Multiple Suppliers in an Electronic Market

An electronic marketplace typically provides industrial suppliers an alternative option for selling their capacity in addition to the traditional open market. However, suppliers face different sets of costs and risks in open market and in electronic market. Consequently, suppliers participating in an electronic market are likely to offer their capacity at a different price compared with traditional open market. We analyze this problem and derive the price‐capacity function for the supplier. We also derive a basis for allocating buyer's requirements among multiple suppliers so as to minimize his cost. Our model shows that suppliers with large capacities would quote a lower price in the electronic market. It also predicts that the unit bid price increases with bid quantity in the electronic market. Based on the price‐capacity curve, we model a scenario where the buyer announces, a priori, the number of suppliers to be selected for award of a contract that will minimize its costs.     

Finite mixtures of natural exponential families

Let μ be a positive measure concentrated on R⁺ generating a natural exponential family (NEF) F with quadratic variance function V_F(m), m being the mean parameter of F. It is shown that v(dx) = (γ+x)μ(γ ≥ 0) (γ ≥ 0) generates a NEF G whose variance function is of the form l(m)Δ+cΔ(m), where l(m) is an affine function of m, Δ(m) is a polynomial in m (the mean of G) of degree 2, and c is a constant. The family G turns out to be a finite mixture of F and its length-biased family. We also examine the cases when F has cubic variance function and show that for suitable choices of γ the family G has variance function of the form P(m) + Q(m)m where P, Q are polynomials in m of degree m2 while Δ is an affine function of m. Finally we extend the idea to two dimensions by considering a bivariate Poisson and bivariate gamma mixture distribution.     

The inverse gaussian distribution: Some properties and characterizations

This article presents some structural properties of the inverse Gaussian distribution, together with several new characterizations based on constancy of regression of suitable functions on the sum of n independent identically distributed random variables. A decomposition of the statistic λσ (X^?1_i?X^?1) into n - 1 independent chi-squared random variables, each with one degree of freedom, is given when n is of the form 2^r.     

Dual Sourcing Inventory Systems: On Optimal Policies and the Value of Costless Returns

We study dual sourcing inventory systems with backordering and with stationary, stochastic demands. The two supply sources differ in their unit prices and lead times. We focus on the option of making costless returns to the cheaper, longer leadtime supplier. We show that the value of this option is zero. Our analysis leading to this result includes the derivation of several structural properties of the optimal policies for dual sourcing systems with and without the return option.     

Sourcing Through Auctions and Audits

Buyers often find that obtaining complete information about suppliers is costly. In such scenarios, there is a trade‐off between the costs of obtaining information and the benefits that accrue to the owners of such information. There are also various ways in which the missing information can be obtained or inferred. In this paper, we compare the efficiency of obtaining information via the classical mechanism design approach, which relies on the information available before the contracts are designed, with that of an “audit‐based” approach, which relies on the information obtained after the fact. In our model, a single buyer (the Stackelberg leader) wishes to procure a package of products or services from various competing suppliers that possess private cost information. We allow for arbitrary cost and revenue functions and can incorporate multiple cost and revenue drivers. We show how the buyer can optimize her profit and at the same time coordinate the channel by using a contract scheme involving auctions, audits, and profit sharing. We also examine the behavior of this mechanism when the supplier can exert effort to reduce cost but the cost of effort cannot be verified. We propose several mechanisms for different precontract informational scenarios and compare their performance.