The Or Times Vol 2 Issue 1 Spring 2008

Editor’s Desk

Alumni Revenue Management and the Airline Industry: Revenue management was born in the early eighties in the airline industry. Its roots can be traced to the pioneering research of Littlewood; a British Mathematician in 1972. Revenue management was used by American Airlines to counter the challenge posed by PeopleExpress – a low-cost airline that offered low prices for every ticket. American Airlines recognized that by offering some seats at the low fares offered by PeopleExpress and some with special features at higher fares, they could regain market from PeopleExpress. It worked, and with time, these strategies blossomed into what is now known as revenue management (RM). RM is sometimes defined as the science used to sell portions of perishable inventory, such as the seats on an airplane or the rooms in a hotel, at different fares (prices) to different customers in order to maximize revenues. For the most part, RM deals with the revenue side of the business, unlike supply chain management which primarily focuses on the cost side. Outside of the airline industry, RM is now widely used in hotels, casinos, cruise-lines and sports. Computerized systems, e.g., ERP systems, have made it possible to collect vast amounts of customer information. It is vital for revenue managers to recognize differences in customers’ purchasing habits. Offering the right fares at the right time requires accurate market segmentation. The other trend that has boosted RM is the rise of e-commerce. Because of the internet, market monitoring, changing prices and advertising of products have become much easier. Today, we are in the middle of some challenging times for RM in the airline industry. Many large companies were recently on the verge of bankruptcy. 9/11 was a big blow to airlines. After 9/11, people were flying less, and many businesses had changed their models to function without air travel. The economy was weakened and it has never recovered. The airline network restructure hurt the large carriers; they responded to the reduced volumes of air-travel demand by using smaller planes and drastically reducing the number of operating planes. (See RM continued)

We would like to thank all the faculty, graduate students and the alumni who played such a significant role in the success of the debut volume of The OR Times. We had three enlightening issues in the fall of 2007, all of which were applauded by the readers. We also wish to acknowledge the department of IMSE for footing the printing bills and ensuring that the issued were launched on the planned dates. INFORMS USF Student Chapter was established in 2005 and currently has 45 members all of whom students in the Industrial Engineering sub division. We encourage graduate students in the Engineering Management division to join the Association, a process which can be easily fulfilled through OASIS. We had several accomplishments in Fall 2007, some which include: A fundraiser at the department, where INFORMS treated the entire department with international cuisines. INFORMS participated in the Annual Conference in Seattle with 12 presentations from members. We participated in cheering the USF football team at the Raymond James Stadium, during their match against the University of Louisville. This year, we begin the second volume with an exciting issue with articles on the several aspects on the role of Industrial Engineers in Revenue Management, Political Science and Power Markets. We would like to solicit articles for upcoming issues. Send your articles to [email protected]. By Wilkistar Otieno, The OR Times Editor RM continued

We are now seeing that this is causing huge delays especially for the network carriers. A number of point-to-point carriers, most of which are not unionized, have now captured a significant portion of the market. What remains to be seen how RM systems adapt to these events. By Abhijit Gosavi, Ph.D., Asst. Prof, ISE SUNY, Buffalo

Volume 2, Issue 1 Spring 2008

ue: is iss h t e d ....2 Insi ........

. ndering. Gerryma OR and g in n Plannin .....3 Expansio ower markets. . n o ti a er P n c Ge ri ct le E red Restructu

A Newsletter from Student Chapter of INFORMS @ IMSE, USF

News Feature OR and Gerrymandering nipulation of boundaries for electoral advantage is blunt You might think that the last place OR cheating, yet in political circles is called “gerrymandering.” can be employed is in politics and you would be dead wrong. Take for instance, Operations researchers have tackled this problem the following situation in US politics. for quite some time now and some papers date back to the For political purposes, each state in the 1960’s. Obviously, the “fair and honest” operations researchers focused on how to design districts to effectively US is divided in congressional districts, and several officials are elected in these prevent the art of gerrymandering. The idea behind this anti-gerrymandering strategy was to come up with a set of districts. This is the case even in the primaries in some homogeneous regions with approximately the same size states.. For instance, on the night of February 7 2008 in and compact. More recent papers have also added other the California Democratic Primary, the total amount of votes for each candidate at the state level did not matter as constraints like socio-economic homogeneity. much as the votes each candidate obtained in each conIn addition to the challenges posed by finding the gressional district in California. This happens because right problem formulation, i.e., a suitable objective function delegates (or the people who really have the say in calling and effective constraints, it is hard to find a convenient sothe election for one of the candidates) are allocated propor- lution method given how rapidly the problem increases in tionally according to districts. dimensionality. I checked a couple of papers and they used genetic algorithms and tabu search to solve the problem.

What happens if the way these districts are designed favors some political sector? Think on the following scenario, consider three border congressional districts A-BC and assume that they are located in that way from left to right in a map. Assume A and C are two times the size of B and they are 90% Republican. On the other hand, B is small and with just a slight Democratic majority, say 52% against 48% republicans. If the populations in A and C bordering B are densely populated and 99% Republican, wouldn’t it be better for Republicans if the boundaries of districts A and C were moved a little bit to the left and right respectively? It would certainly be better for them and may be not for us.. With the new design the Republicans would be majority in the three districts, as opposed to just two as it is in the original design and therefore they would get delegates from the three districts. In my books, this ma-

I thought all this gerrymandering talk was actually out of date, but you never know when it would come back. After suffering several losses in the past general elections, last year some California Republicans tried to introduce a ballot initiative awarding presidential electoral votes to the winning candidate (of the general elections) in each of the state’s congressional districts thereby changing the current system in which the statewide winner gets California’s 55 electoral votes. It seems that the initiative finally was not introduced, but, as I wrote before, you never know when it will come back and thereby when gerrymandering will be in the limelight again. Who knows? You might end up being a political hack trying to devise the right geographical configuration to help some political party win elections in the future.

USF- Engineering EXPO Engineering EXPO is an open-house 2-day activity for elementary and middle school kids to get interested in engineering. This year, the IMSE department will participate with the following three exhibitions: •

The Automation & Robotics lab will show different demos of robotic arms and automated machines.

•

Human Factors lab will introduce different topics like anthropometry, ergonomics, safe design and time measurement.

•

Simulation lab will show different computational implementations modeling real life situations.

These exhibitions will be presented by INFORMS chapter members. Simulation of a warehouse using FLEXIM 2

Research Corner Generation Expansion Planning in Restructured Electric Power Markets According to the National Energy Policy (NEP) developed in 2001 and the Annual Energy Outlook 2007, energy demand in the U.S. is slated to increase sharply over the next two decades. It is stated in the NEP that the United States will need about 393,000 MW of new generating capacity by 2020 to meet this growing demand. This amounts to the construction of 1,300 to 1,900 new power plants, averaging to about 60 to 90 plants a year, or more than one a week. With about fifteen States in the U.S. currently trading electricity in restructured markets (markets with reduced governmental control), a significant proportion of the aforementioned capacity expansion will have to take place in a market based environment. But, almost all of the research concerning capacity expansion has been conducted under the regulated market paradigm (aka, centralized market control). As a result, authorities in several countries with restructured electricity markets have attempted to control decisions on generation investments, instead of leaving it to market forces, to avoid detrimental impacts of capacity shortages on society. Our research intends to fill this vacuum by developing a comprehensive methodology to obtain multi-period multi-generator equilibrium capacity expansion strategies in restructured electricity markets.

response to expected demand growth, changes in network conditions, and market design incentives. This will be accomplished by developing a comprehensive model and a computational solution strategy considering major electric power market features including multiple competing generators, a multi-year planning horizon, transmission constraints in electric power networks, construction lead times, demand variability, emission limits, system reliability, risk of profit volatilities, and market power. Our model has a multitier game theoretic construct that iteratively builds multiyear multi-player equilibrium expansion strategies for the generators. This will be accomplished by solving a number of matrix games for each year of the planning horizon, where each generator determines his/her equilibrium expansion plan from a set of feasible expansion actions, each comprising a choice of generation technology and capacity.

In this research, we will address the critical societal challenge of determining which type, where, and at what time period new generation capacities are likely to be added to a power network by the competing generators in

By Vishnu Nanduri, Ph.D. Candidate IMSE & Tapas K. Das , Associate Provost, and Profesor of Industrial Engineering

Until late nineties, a significant number of papers appeared in the literature examining the generation expansion planning (GEP) process in regulated market places. These papers studied GEP as an optimization (cost minimization) problem of a central planning authority. However, in a restructured market, the GEP problem must be viewed as multi-player noncooperative profit maximization problem and its solution should be derived from the equilibrium solutions of noncooperative games. Our modeling approach addresses this issue.

Column solicited by Diana Prieto, Ph.D. student, IMSE.

IMSE Students at a USF football game

3

Puzzles 1.

If you need to be able to weigh anything between 1 and 40 pounds using a beam balance, what is the minimum number of weights you would need?

2.

There are one thousand lockers and one thousand students. The first student goes to every locker and opens it. Then the second student goes to every second locker and closes it. The third goes to every third locker and, if it is closed, he opens it, and if it is open, he closes it. The fourth student does this to every fourth locker, and so on. After the process is completed with the thousandth student, how many lockers are open? Contributed by Chaitra Gopalappa Ph.D. Student, IMSE

SOLUTIONS: 1.

One of the useful applications of base system. You need 4 weights 1, 3, 9, 29 (look up ternary decimal in Gentle art of mathematics by Daniel Pedoe, Pg 31)

2. Thirty one. Only the perfect square numbered lockers (1, 2, 4, 9, 16, ...., 961), are open at the end of it. This is because perfect squares have an odd number of factors while all other numbers have an even number of factors.

only

Volume 2, Issue 1

JOB POSTINGS 1.

FACULTY POSITIONS at Department of Systems and Industrial Engineering The University of Arizona 2. FACULTY POSITION in the Department of Engineering Management and Systems Engineering --University of Missouri - Rolla 3. FACULTY POSITIONS in the Grado Department of Industrial and Systems Engineering VIRGINIA TECH 4. FACULTY POSITION IN ENGINEERING MANAGEMENT Department of Engineering Management and Systems Engineering The School of Engineering and Applied Science of The George Washington University 5. FACULTY OPENING Rochester Institute of Technology Industrial and Systems Engineering Department (ISE) 6. FACULTY POSITION McCormick School of Engineering and Applied Sciences Department of Industrial Engineering and Management Sciences Northwestern University For details and more job see http://informs.eng.usf.edu/jobs.htm (compiled by Wilkistar Otieno)

Did you Know... Spring 2008

Dr. Tapas Das

For his recent appointment as the Associate Provost. of USF

...That Frank Bunker Gilbereth (1868-1924), the pioneer of

~O~

Motion Study and author of Cheaper by Dozens had no formal education after high school? He moved from being a brick layer to a building contractor to eventually a Management Engineer occasionally giving lectures at Purdue. He was husband to Lillian Gilbereth (1878-1972) the mother of Modern Management.

Vishnu Nanduri & Dr. Tapas Das

For winning the best paper in the Energy Sponsored Sessions of the INFORMS 2007 Annual Conference. ~O~

Dayna Martinez

For being winner of

SHPE/GEM award-P.h.D Category at the SHPE’s 2007 Annual Conference.

Contributed by Wilkistar Otieno

Vishnu Nanduri President

Diana Prieto Laila Cure Publicity

Patricio Rocha Vice President Wilkistar Otieno Ozan Ozcan Treasurers Athina Brintaki Secretary Chaitra Gopalappa Dayna Martinez Logistics

Andres Uribe Webmaster

IMSE 4202 E. Fowler Ave. ENB 118 Tampa FL, 33620 Tel: (813) 974-5591 Fax: (813) 974-5953 [email protected] 4

Alcides Santander Shaoqiang Chen Social activities Wilkistar Otieno Laila Cure Editors