Manufacturing & Service Operations Management最新文献

{"title":"Corporate Governance and Related Party Transactions in Global Supply Chains","authors":"Seungrae Lee, Michael K. Lim, Seung Jae Park, Sridhar Seshadri","doi":"10.1287/msom.2022.0372","DOIUrl":"https://doi.org/10.1287/msom.2022.0372","url":null,"abstract":"Problem definition: As related party transactions (RPTs) increase in global supply chains, understanding the impact of corporate governance on such transactions becomes crucial for businesses. RPTs often lead to operational diversion due to power disparities between parent and its subsidiaries. In this study, we explore how operational diversion in RPTs within multinational firms is affected by the roles of foreign subsidiaries and corporate governance mechanisms. Methodology/results: Using a unique data set on RPTs of Korean multinational firms from 2006 to 2013, we compare the performance of multinational firms engaging in RPTs with two types of foreign subsidiaries: vertical and horizontal. We conduct our empirical analysis based on the adoption of International Financial Reporting Standards (IFRS) in Korea in 2011, which acts as a policy shock affecting corporate governance and deterring operational diversion. Our results show that the improvement in operational performance of a multinational firm following the IFRS adoption is more significant when the parent firm engages in transactions with vertical subsidiaries compared with horizontal ones. We further show that strong corporate governance mechanisms, such as internal governance, institutional ownership, and large shareholders, play a crucial role in restraining operational diversion in RPTs involving vertical subsidiaries. Managerial implications: The implications of our study extend to shareholders and auditors, highlighting the importance of prioritizing monitoring efforts concerning a parent firm’s RPTs with vertical subsidiaries, especially when corporate governance mechanisms are weak. In contrast, RPTs with horizontal subsidiaries are relatively robust against operational diversion, making them a natural deterrent to such malpractices.Funding: This work was supported by the Institute of Management Research at Seoul National University, the Hankuk University of Foreign Studies Research Fund [2023], and the Research Fellowship Fund of the Sangnam Institute of Management, Yonsei University [2020-22-0007].Supplemental Material: The online appendix is available at https://doi.org/10.1287/msom.2022.0372 .","PeriodicalId":501267,"journal":{"name":"Manufacturing & Service Operations Management","volume":"5 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-03-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140201854","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Frontiers: News Event-Driven Forecasting of Commodity Prices","authors":"Sunandan Chakraborty, Srikanth Jagabathula, Lakshminarayanan Subramanian, Ashwin Venkataraman","doi":"10.1287/msom.2022.0641","DOIUrl":"https://doi.org/10.1287/msom.2022.0641","url":null,"abstract":"Problem definition: Commodity prices have exhibited significant volatility in recent times, which poses an exogenous risk factor for commodity-processing and commodity-trading firms. Accurate commodity price forecasts can help firms leverage data-driven procurement policies that incorporate the underlying price volatility for financial and operational hedging decisions. However, historical prices alone are insufficient to obtain reasonable forecasts because of the extreme volatility. Methodology/results: Building on the hypothesis that commodity prices are driven by real-world events, we propose a method that automatically extracts events from news articles and combines them with price data using a neural network-based predictive model to forecast prices. In addition to achieving a high prediction accuracy that outperforms several benchmarks (by up to 13%), our proposed model is also interpretable, which allows us to identify meaningful events driving the price fluctuations. We found that the events frequently associated with major fluctuations in the price include “natural,” “hike,” “policy,” and “elections,” all of which are known drivers of price change. We used a corpus containing about 1.6 million news articles of a major Indian newspaper spanning 15 years and daily prices of four crops (onion, potato, rice, and wheat) in India to perform this study. Our proposed approach is flexible and can be used to predict other time series data, such as disease incidence levels or macroeconomic indicators, that are also influenced by real-world events. Managerial implications: Firms can leverage price forecasts from our system to design inventory and procurement policies in the face of uncertain commodity prices. Commodity merchants can also use the forecasts to design optimal storage policies for physical trading of commodities when prices are volatile. Our findings can also significantly impact policymakers, who can leverage the information of impending price changes and associated events to mitigate the negative effects of price shocks.History: This paper has been accepted in the Manufacturing & Service Operations Management Frontiers in Operations Initiative.Supplemental Material: The online appendix is available at https://doi.org/10.1287/msom.2022.0641 .","PeriodicalId":501267,"journal":{"name":"Manufacturing & Service Operations Management","volume":"39 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-03-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140201789","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Toward Advancing Women’s Health in Least Developed Countries: Evaluating Contraceptive Distribution Models in Senegal","authors":"Amir Karimi, Anant Mishra, Karthik V. Natarajan, Kingshuk K. Sinha","doi":"10.1287/msom.2021.0488","DOIUrl":"https://doi.org/10.1287/msom.2021.0488","url":null,"abstract":"Problem definition: Improving access to contraceptives is one of the most effective interventions to prevent unintended pregnancies and save the lives of women in least developed countries (LDCs), where the overwhelming majority of maternal deaths occur. However, access to reproductive health commodities is often limited in LDCs because of frequent stock-outs at last-mile health facilities. In this study, we evaluate and compare the effect of two distribution models on last-mile contraceptive availability and key public health outcomes (e.g., unintended pregnancies, maternal and newborn deaths). These distribution models are (i) the commonly used pull distribution model, in which health facilities are fully responsible for managing inventory, and (ii) an alternative model known as the informed push distribution model, which delegates inventory management tasks to external logistics providers. Methodology/results: We leverage the staggered transition from pull distribution to informed push distribution in Senegal, a country that redesigned its contraceptive distribution system. We conduct empirical analyses, including a triple differences estimation, on novel field data compiled from multiple sources to evaluate the effect of the transition. We find that the transition significantly reduces contraceptive stock-outs, frontline health worker workload, unintended pregnancies, and maternal and newborn mortalities and also improves client satisfaction, especially in health facilities with less mature inventory management practices and less developed road infrastructure. A comprehensive cost–benefit analysis shows that the aforementioned benefits are achieved in a cost-efficient manner at these facilities, making them prime candidates for the transition. However, for facilities with less mature inventory management practices but more developed road infrastructure, upgrading the inventory management system is a substantially more cost-efficient alternative than transitioning to a new distribution model without compromising the benefits. Managerial implications: Given the resource constraints faced by the public health sector in LDCs, it is imperative to understand how the operational and public health benefits of the transition to the informed push model vary based on facility characteristics. Our findings offer actionable insights for resource allocation by identifying health facilities that benefit the most from the transition.Supplemental Material: The online appendix is available at https://doi.org/10.1287/msom.2021.0488 .","PeriodicalId":501267,"journal":{"name":"Manufacturing & Service Operations Management","volume":"279 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-03-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140201922","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Fixing Inventory Inaccuracies at Scale","authors":"Vivek F. Farias, Andrew A. Li, Tianyi Peng","doi":"10.1287/msom.2023.0146","DOIUrl":"https://doi.org/10.1287/msom.2023.0146","url":null,"abstract":"Problem definition: Inaccurate records of inventory occur frequently and, by some measures, cost retailers approximately 4% in annual sales. Detecting inventory inaccuracies manually is cost-prohibitive, and existing algorithmic solutions rely almost exclusively on learning from longitudinal data, which is insufficient in the dynamic environment induced by modern retail operations. Instead, we propose a solution based on cross-sectional data over stores and stock-keeping units (SKUs), viewing inventory inaccuracies as a problem of identifying anomalies in a (low-rank) Poisson matrix. State-of-the-art approaches to anomaly detection in low-rank matrices apparently fall short. Specifically, from a theoretical perspective, recovery guarantees for these approaches require that nonanomalous entries be observed with vanishingly small noise (which is not the case in our problem and, indeed, in many applications). Methodology/results: So motivated, we propose a conceptually simple entrywise approach to anomaly detection in low-rank Poisson matrices. Our approach accommodates a general class of probabilistic anomaly models. We show that the cost incurred by our algorithm approaches that of an optimal algorithm at a min-max optimal rate. Using synthetic data and real data from a consumer goods retailer, we show that our approach provides up to a 10× cost reduction over incumbent approaches to anomaly detection. Along the way, we build on recent work that seeks entrywise error guarantees for matrix completion, establishing such guarantees for subexponential matrices, a result of independent interest. Managerial implications: By utilizing cross-sectional data at scale, our novel approach provides a practical solution to the issue of inventory inaccuracies in retail operations. Our method is cost-effective and can help managers detect inventory inaccuracies quickly, leading to increased sales and improved customer satisfaction. In addition, the entrywise error guarantees that we establish are of interest to academics working on matrix-completion problems.History: This paper was selected for Fast Track in M&SOM from the 2022 MSOM Supply Chain Management SIG Conference.Funding: Financial support from the National Science Foundation Division of Civil, Mechanical, and Manufacturing Innovation [Grant CMMI 1727239] is gratefully acknowledged.Supplemental Material: The online appendix is available at https://doi.org/10.1287/msom.2023.0146 .","PeriodicalId":501267,"journal":{"name":"Manufacturing & Service Operations Management","volume":"19 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-03-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140150191","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Service Quality Implications of Long Periods of Consecutive Working Days: An Empirical Study of Neonatal Intensive Care Nursing Teams","authors":"F. Miedaner, L. Kuntz, K. Eilermann, B. Roth, S. Scholtes","doi":"10.1287/msom.2022.0021","DOIUrl":"https://doi.org/10.1287/msom.2022.0021","url":null,"abstract":"Problem definition: We examine the effects of prolonged consecutive working days without breaks on care quality and explore its association with daily staffing levels in neonatal intensive care nursing teams. Academic/practical relevance: Healthcare organizations typically base staffing guidelines on safe daily metrics like nurse-to-patient ratios. However, in response to unforeseen demand spikes or staff shortages, managers often depend on staff working additional consecutive days to bridge staffing gaps. This approach, although addressing immediate staffing needs, can inadvertently impact care quality and safety, potentially undermining the benefits of higher staffing levels. Methodology: Using longitudinal data from 62 German neonatal units, we analyze the effect of nursing teams’ consecutive working days on the time from admission to full enteral feeding for 847 low-birth-weight babies, considering nurse-to-patient ratios and patient complexity. Results: Longer consecutive working periods harmfully affect care quality, especially during staffing shortages. The detrimental impact on days with low staffing is particularly pronounced in patients with less complex medical needs. Limiting the team-average number of consecutive working days to two days would have reduced the time to full enteral feeding in our study by 6.4%. Shifting from half a day less to half a day more than the average number of consecutive working days has an impact equal to 20% of the difference in time taken to reach full enteral feeding between low- and high-birth-weight babies. Managerial implications: Limiting consecutive working days could significantly improve intensive care outcomes. Management should monitor consecutive working days alongside daily staffing levels. Policy makers should consider introducing limits on the number of consecutive working days for intensive care nurses.Funding: This work was supported by the Federal Ministry of Education and Research in Germany [Grant 01GY1152].Supplemental Material: The online appendix is available at https://doi.org/10.1287/msom.2022.0021 .","PeriodicalId":501267,"journal":{"name":"Manufacturing & Service Operations Management","volume":"15 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-03-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140149803","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Optimal Consolidation of Polling Locations","authors":"Adam P. Schmidt, Duncan Buell, Laura A. Albert","doi":"10.1287/msom.2022.0497","DOIUrl":"https://doi.org/10.1287/msom.2022.0497","url":null,"abstract":"Problem definition: Many logistical and financial challenges of facilitating an election lead election officials to consolidate polling locations. However, determining when it is appropriate to consolidate polling locations and how to consolidate polling locations, if necessary, is a difficult and high-stakes decision that influences voter participation. Methodology/results: We formalize the set of constraints and criteria that election officials should follow as the polling location consolidation problem (PLCP), which is formulated as an integer programming model. The PLCP simultaneously selects which polling locations will be used in the upcoming election, reassigns voter precincts to polling locations, and allocates critical resources to the selected polling locations. The PLCP minimizes the increased distance that voters must travel to their updated polling location. Because empirical research also demonstrates the importance of reducing the voters’ wait times, we require that most voters do not wait longer than a prespecified limit, such as 30 minutes, using a chance constraint. We prove that identifying a feasible solution to PLCP is NP-complete, which demonstrates the difficulty in making consolidation decisions, as well as the importance of optimization for this problem. Managerial implications: This paper introduces a structured and transparent approach to support election officials in making informed, data-driven decisions regarding how and when to consolidate polling locations that minimally impact voters and encourage voter participation. The approach could be used to develop preapproved contingency plans that could be employed if there are major disruptions to an election.Supplemental Material: The online supplement is available at https://doi.org/10.1287/msom.2022.0497 .","PeriodicalId":501267,"journal":{"name":"Manufacturing & Service Operations Management","volume":"21 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-03-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140076681","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Improving Farmers’ Income on Online Agri-Platforms: Evidence from the Field","authors":"Retsef Levi, Manoj Rajan, Somya Singhvi, Yanchong Zheng","doi":"10.1287/msom.2022.0437","DOIUrl":"https://doi.org/10.1287/msom.2022.0437","url":null,"abstract":"Problem definition: To improve the welfare of smallholder farmers, multiple countries (e.g., Ethiopia and India) have launched online agri-platforms to transform traditional markets. However, there is still mixed evidence regarding the impact of these platforms and, more generally, how they can be leveraged to enable more efficient agricultural supply chains and markets. This paper describes work conducted in close collaboration with the state government of Karnataka, India, to design, implement, and assess the impact of a new two-stage auction on the state’s online agri-platform, the United Market Platform (UMP). Methodology/results: To ensure implementability and protect farmers’ revenue, the auction design is guided by practical operational considerations, as well as semistructured interviews with a majority of the traders in the field. A new behavioral auction model informed by the field insights is developed to determine when the proposed two-stage auction can generate a higher revenue for farmers than the traditional single-stage, first-price, sealed-bid auction. The new auction mechanism was implemented on the UMP for a major market of lentils in February 2019. By the end of May 2019, commodities worth more than $6 million (USD) had been traded under the new auction. A difference-in-differences analysis demonstrates that the implementation has yielded a significant 3.6% price increase (corresponding to a 55%–94% profit gain) for over 10,000 farmers who traded in the treatment market. Managerial implications: The results from this paper offer tangible lessons on how innovative price discovery mechanisms could be enabled by online agri-platforms in resource-constrained environments. Importantly, the success of these designs critically depends on careful considerations of systemic operational and behavioral factors that affect trades in the physical markets.History: This paper has been accepted as part of the 2023 Manufacturing & Service Operations Management Practice-Based Research Competition.Funding: Financial support from the Tata Center for Technology and Design at MIT and the National Science Foundation [Grant 1452875] is gratefully acknowledged.Supplemental Material: The online appendix is available at https://doi.org/10.1287/msom.2022.0437 .","PeriodicalId":501267,"journal":{"name":"Manufacturing & Service Operations Management","volume":"81 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-03-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140054902","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Retail Category Management with Slotting Fees","authors":"Yasin Alan, Mümin Kurtuluş, Alper Nakkas","doi":"10.1287/msom.2022.0143","DOIUrl":"https://doi.org/10.1287/msom.2022.0143","url":null,"abstract":"Problem definition: Slotting fees are lump-sum payments retailers demand from manufacturers to include manufacturers’ products in their assortments. Although retailers regard slotting fees as part of doing business, some manufacturers claim that slotting fees limit their ability to compete on a level playing field with other manufacturers. Considering these conflicting views, we study the role of manufacturer competition in the emergence of slotting fees and how slotting fees affect retailers’ category management (i.e., assortment and pricing) decisions. Methodology/results: We consider a game-theoretic model with a single retailer and two competing manufacturers, each offering a single product. The retailer makes slotting fee, assortment, and pricing decisions in the presence of an operational cost term that increases in the assortment size. The manufacturers that can afford the slotting fee set the wholesale prices for their products. This study leads to three key findings. First, slotting fees can be suboptimal when their absence would trigger intense wholesale price competition. Second, depending on the retailer’s operational cost and the intensity of manufacturer competition, slotting fees create three distinct effects -category expansion, rent extraction, and competitive exclusion under which product variety (i.e., the retailer’s assortment size) increases, remains unchanged, and decreases, respectively. Third, slotting fees are most (least) beneficial for the retailer when they lead to a decrease (increase) in product variety. Managerial implications: This study not only illustrates that retailers can use slotting fees as a strategic tool to control the intensity of manufacturer competition but also reveals how slotting fees impact retailers’ assortment and pricing decisions, with implications for manufacturers and policy makers.Supplemental Material: The online appendix is available at https://doi.org/10.1287/msom.2022.0143 .","PeriodicalId":501267,"journal":{"name":"Manufacturing & Service Operations Management","volume":"66 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-03-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140054922","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Frontiers in Operations: The Confidence Trap in Operations Management Practices: Anatomy of Man-Made Disasters","authors":"Akhil Bhardwaj, Henk Akkermans","doi":"10.1287/msom.2023.0034","DOIUrl":"https://doi.org/10.1287/msom.2023.0034","url":null,"abstract":"Problem definition: Reducing the likelihood of man-made disasters that cause harm to life, property, and the environment is a key societal goal. To that end, regulatory agencies are responsible for ensuring man-made disasters do not occur. In practice, to accomplish this task, regulators have to rely on and cooperate with operators. However, how much cooperation is optimal? In this study, we explore the prudent level of cooperation between operators and regulators to avoid man-made disasters and the role whistleblowers and other policy levers can play in maintaining it within a Goldilocks range. Methodology/results: We synthesize various theories and accounts of man-made disasters to construct a system dynamics model of the mechanisms that lead up to these unwanted outcomes. We employ simulations to uncover how changes in crucial parameters related to cooperation lead to different outcomes and influence the likelihood of the occurrence of man-made disasters. Managerial implications: We resist explanations for man-made disasters rooted in regulatory capture and offer instead a nuanced account rooted in excess cooperation between operators and regulators emerging as a result of everyday operational imperatives and constraints. Our findings indicate that absence of disasters leads operators and regulators to fall into a “confidence trap” that perpetuates limited regulatory oversight and excess cooperation and eventually leads to a disaster. To mitigate this tendency, we investigate, in particular, the role that timely whistleblowing and other policy levers can play in mitigating man-made disasters. We provide managerial and policy implications such as incentivizing and safeguarding whistleblowers, limits on the revolving door between operators and regulators, and more stringent operating and safety scientific standards. Overall, we offer a new frame and potentially fruitful frontier for the operations management community to explore.History: This paper has been accepted in the Manufacturing & Service Operations Management Frontiers in Operations Initiative.Supplemental Material: The online supplement is available at https://doi.org/10.1287/msom.2023.0034 .","PeriodicalId":501267,"journal":{"name":"Manufacturing & Service Operations Management","volume":"258 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140016695","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Aggregating Distributed Energy Resources: Efficiency and Market Power","authors":"Zuguang Gao, Khaled Alshehri, John R. Birge","doi":"10.1287/msom.2021.0539","DOIUrl":"https://doi.org/10.1287/msom.2021.0539","url":null,"abstract":"Problem definition: The rapid expansion of distributed energy resources (DERs) is one of the most significant changes to electricity systems around the world. Examples of DERs include solar panels, electric storage, thermal storage, and combined heat and power plants. Because of the small supply capacities of these DERs, it is impractical for them to participate directly in the wholesale electricity market. We study in this paper the question of how to integrate these DER supplies into the electricity market, with the objective of achieving full market efficiency. Methodology/results: We study four aggregation models, where there is an aggregator who, with the knowledge of DERs’ utility functions and generations, procures electricity from DERs, and sells them in the wholesale market. In the first aggregation model, a profit-maximizing aggregator announces a differential two-part pricing policy to the DER owners. We show that this model preserves full market efficiency, that is, the social welfare achieved by this model is the same as that when DERs participate directly in the wholesale market. In the second aggregation model, the profit-seeking aggregator is forced to impose a uniform two-part pricing policy to prosumers from the same location, and we numerically show that there can be large efficiency loss. In the third (fourth) aggregation model, a uniform (semiuniform) two-part pricing policy is applied to DER owners, whereas the aggregator becomes fully regulated but is guaranteed nonnegative (positive) profit. It is shown that these models again achieve full market efficiency. Furthermore, we show that DER aggregation also leads to a reduction in the market power of conventional generators. Managerial implications: DER aggregation via profit-seeking and/or regulated aggregators has been investigated by California Independent System Operator and New York Independent System Operator, among others, and the recent Federal Energy Regulatory Commission Order No. 2222 paved the way for aggregators to bid in the wholesale market. Our four aggregation models may shed light on how DERs should be included in the wholesale electricity market.Funding: This work was supported by the King Fahd University of Petroleum and Minerals [Grant INML2106] and the National Science Foundation [Grant 1832230].Supplemental Material: The online appendices are available at https://doi.org/10.1287/msom.2021.0539 .","PeriodicalId":501267,"journal":{"name":"Manufacturing & Service Operations Management","volume":"19 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140016840","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}