OR/MS Today - February 1998

February 1998

Franz Edelman Award Finalists Announced

Representing applications from process control, portfolio analysis, forecasting, logistics and decision support planning, seven finalists will vie for the 1998 Franz Edelman Award for Achievement in Operations Research and the Management Sciences.

Stephen Strauss, chair of the 1998 competition, announced the following finalists: Bosques Arauco S.A., Cerestar, Grantham, Mayo, Van Otterloo & Co., LLC, Johnston County (N.C.) Public Schools, Maristrans, Inc., Pacific Lumber Company, and Sears.

Finalist presentations for the 1998 competition will be given on April 26, during the CORS/INFORMS Montréal meeting (April 26-28) at the Queen Elizabeth Bonaventure Hilton. Those interested in the practice of operations research and management science are encouraged to attend the day-long presentation session. The cost is $95 per person and includes lunch and a post-presentation luncheon on April 28th.

Results will be announced at the awards presentation on April 28.

This is the 27th year that the prestigious $15,000 competition has been held. The award is jointly sponsored by INFORMS and CPMS, the Practice Section of INFORMS.

The Edelman Award recognizes outstanding implemented work that has had a significant, positive impact on the performance of the client organization. The top finalist receives a $10,000 first prize.

The work to be presented by this year's finalists covers a wide range of operations research applications. Finalist information follows:

Bosques Arauco S.A

Andres Weintraub, Rafael Epstein and Ramiro Morales; "Use of OR Systems in the Chilean Forest Industries."

One of the largest Chilean forest firms, Bosques Arauco employs five different optimization systems, designed by a team from the University of Chile, at three different decision levels. The systems include ASICAM, a daily truck scheduling system; OPTICORT, a short term harvesting system; PLANEX, a harvesting equipment and access road location optimization system; OPTIMED, a medium range planning tool; and MEDFOR, a long-term strategic planning tool.

These systems will continue to evolve with time, as the needs of firms change and systems become increasingly sophisticated. The impact of these systems has been organizational and financial, with Bosques Arauco reporting a total savings of $5 million over a total annual timber production of $140 million. Similar results have been reported by other Chilean forest companies using these systems.

Cerestar

Kumar Rajaram, R. Jaikumar, Franz Behlau, Frans Van Esch, Corrie Heynen, Albert Kutner, Izzak Van De Wege and Ralph Kaiser; "Robust Process Control at Cerestar's Refineries."

Europe's leading manufacturer of made-to-order wheat and corn-based starch products, Cerestar operates more than 20 different types of industrial scale processes in 16 plants across nine countries with annual sales exceeding $2 billion. A framework called Robust Process Control (RPC) was developed to increase average throughputs and reduce throughput variation without significant investments in new process technology. Running selected refineries at least 90 percent of the time, the implementation of this system has led to gains valued at more than $11 million annually. This represents a 27 percent increase in profits generated by these processes.

Grantham, Mayo, van Otterloo & Co., LLC

Dimitris Bertsimas, Christopher Darnell and Robert Soucy; "Portfolio Construction through Mixed Integer Programming."

A mixed integer programming approach was developed to construct portfolios "close" (in terms of sector and security exposure, liquidity, turnover, and expected return) to target portfolios. The methodology controls frictional costs and does so with fewer stocks and requires fewer tickets. Grantham, Mayo, and van Otterloo, an investment firm managing more than $26 billion for 653 clients, currently uses this approach in the construction of 11 quantitatively managed portfolios representing more than $8 billion in assets since October 1996.

The number of names of securities has been reduced by an average 40-60 percent with only a marginal decrease in liquidity, while maintaining the turnover, performance and sector exposures of target portfolios; the costs of trading portfolios have also decreased annually by at least $4 million due to a 75-85 percent reduction in the number of tickets to trade portfolios and the ability to have a cost model in the objective function.

Johnston County (NC) Public Schools

Raymond G. Taylor, Michael L. Vasu and James Causby; "Integrated Planning for School and Community."

OR/Ed Laboratories and the Johnston County Public Schools created a planning system, Integrated Planning for School and Community, to forecast enrollments, to compare the enrollment projections to capacity, to find the optimal location for new buildings, and to set distance-minimized boundaries for all schools to avoid overcrowding and to meet racial-balance guidelines. The implementation of the system has produced an increased success in the passage of bond issues, a quantifiable minimization of pupil transportation costs and the elimination of frequent school attendance boundary adjustments.

Maritrans, Inc.

Murthy Mudrageda, Frederic Murphy and Steven Welch; "Forecasting the Market for Jones Act Tankers."

When Congress passed the Oil Pollution Act of 1990, it mandated that all oil-carrying vessels above a certain size be double hulled. Maritrans saw the life of its barge fleet truncated when market conditions did not support the construction of new vessels. Among the decisions Maritrans faced was whether to sell its business in the Gulf of Mexico while the existing fleet had value, rebuild the fleet, or operate until forced to retire. Maritrans built a computable economic equilibrium model to forecast and understand future market conditions in the Gulf and test alternative investment strategies.

Using a transportation model to represent demand, data on the retirements of existing vessels and an estimated relationship between capacity utilization and price, market-clearing prices and flows were estimated. The company has now committed $75 million in capital expenditures based in part on the resulting forecast of price increases over the next several years.

Pacific Lumber Company

L. Russell Fletcher, Henry Alden, Dean P. Angelides, Scott P. Holmen and Matthew J. Etzenhouser; "Long-Term Forest Ecosystem Planning at Pacific Lumber."

In 1995, Pacific Lumber contracted with VESTRA Resources to develop a 120- year, 12-period forest ecosystem management plan for their properties to meet new Board of Forestry requirements. VESTRA produced their ecosystem planning express model, Ep(x), which couples geographic information systems with a database resource capability model and policy alternative model to provide inputs to a linear program.

The model increased present net worth by over $320 million and generated a more optimal mix of high quality nesting and roosting spotted owl habitat acres.

Sears

Don Weigel and Buyang Cao; "Dispatching a Nationwide Technician Workforce Under Time Distance and Specialty Constraints — An Application of GIS and Operations Research Techniques."

ESRI developed a geographic information system-based decision support system to solve a technician dispatch problem for Sears. The system consists of a series of algorithms, including the construction of the origin and destination matrix, resource assignment and sequence and route improvement. It has resulted in decreased drive time, reduced technician overtime by 14 percent, increased completed calls by 4.6 percent and improved time performance to 95 percent.

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