Seminars

Service Supply Chain Customer Value Delivery: Optimization, Performance Contracting and Implementation

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Date: 09-12-2006
Start Time: 1:00pm
End Time: 2:00pm
Speaker: Morris Cohen, Wharton School, University of Pennsylvania
Location: Uris 333

Abstract

The delivery of value to customers through the support of mission critical products has become a major source of revenue, profit and competitive advantage. Successful delivery of product support however requires three key elements: 1) management of the complex service supply chains that provide maintenance and repair resources, 2) contracts that determine the relationship between product users and providers of support services, and 3) decision support systems that enable implementation of advanced planning processes that maximize supply chain value.

In this talk, I will discuss recent developments in each of these areas. I will begin by considering the underlying strategic challenges associated with aftermarket product support. I will then describe a model hierarchy that builds on the extensive literature on multi-echelon, multi-indenture inventory systems for after-sales service. The goal of the model hierarchy is to optimize resource deployments over time and geography in a manner that maximizes product availability, minimizes costs, and respects the complex dynamic and stochastic inter-relationships associated with this problem.

I will then introduce an economic modeling framework developed by Cohen, Netessine, and Kim (2006) to analyze incentives in service support relationships that are based on product performance. Traditional contracting mechanisms are based on the sale of the product and high margin support services. The performance based approach requires customers to pay only for actual use/up-time of the products. Such “power by the hour” payment mechanisms are expected to lead to more reliable products with a lower cost of ownership and improved overall supply chain performance. The economic model allows us to consider pricing and performance-based contracting in a multitiered supply chain, characterized by an end customer (i.e. the military) a prime contractor, and a second tier of major system suppliers. I will conclude by reviewing my experience in implementing optimization based software systems in the A&D, high-tech and semiconductor industries. We will discuss lessons learned and implications for future research.

Bio

Morris A. Cohen is the Panasonic Professor of Manufacturing and Logistics in the Operations and Information Management Department of the Wharton School of the University of Pennsylvania where he also holds a secondary appointment in the Department of Electrical and Systems Engineering of the School of Engineering and Applied Science. He is also codirector of Wharton’s Fishman-Davidson Center for Service and Operations Management.

Professor Cohen is chair of MCA Solutions, a software company that he founded, which specializes in planning and optimization for the service supply chain in industries that include aerospace and defense, high technology, telecommunications , and industrial equipment. At MCA, Professor Cohen is actively engaged in developing and communicating the product vision and in the design of leading edge solutions.

Professor Cohen has been a visiting faculty member at Stanford University and the Massachusetts Institute of Technology. He also has served as an editor for a variety of journals, including Operations Research, Journal of Operations Management, Journal of Manufacturing and Operations Management, Naval Research Logistics, Supply Chain Management Review, Journal of Production and Operations Management, Journal of Manufacturing, and Service Operations Management. His book, Manufacturing Automation, was published by Irwin in 1997. He is the recipient of the 2001 Institute of Industrial Engineers Award for the best paper published in IIE Transactions in 1999.

Professor Cohen’s research interests include supply chain strategy and technology planning in a global context with a focus on service support strategies and systems that are enabled by advanced decision support tools. He also has worked extensively in the areas of product development, inventory management, extended value network sourcing strategy, and logistics. He has been a consultant to more than 30 multinational companies in the computer, semiconductor, aerospace, automobile, food, military logistics, process equipment, pharmaceutical, capital equipment leasing, and industrial paper/plastics industries. Professor Cohen has been a member of the board of directors of Vlasic Foods International, Inc., and the Engineering Advisory Committee of the National Science Foundation.

Professor Cohen holds a B.A.Sc. in engineering sciences from the University of Toronto, as well as an M.S. in industrial engineering, and a Ph.D. in operations research from Northwestern University.