Trillion Dollars of Inventory

On September 13^th, I received this email from Mark Lewis (Director, Cornell ORIE):

I am writing with a bit of a strange request, but I think you will appreciate it. Jack Muckstadt turns 80 this month and we are planning a small celebration for him over zoom. While I expect testimonials to develop “organically”, I would like to have a few ‘stars” before opening up the floor for anyone. I thought some of his esteemed colleagues and students might be willing to give a short (1 minute) testimonial. So that is my request of you. The details of the event are below.

What: Celebration of Jack Muckstadt’s 80th Birthday

Where: Via Zoom – link to be provided closer to the day

When: September 27th, 0900-1100 EST

1986. Top Gun. Crocodile Dundee. The Color of Money. Blue Velvet. 9 ¹⁄2 Weeks.

My first semester at Cornell (Fall 1986) was not particularly enjoyable from an academic perspective. I spent a lot of time going to the movies and watching TV: Michael Jordan, Star Trek (with William Shatner and Leonard Nimoy), Johnny Carson.

Not surprisingly, my mid-term exam scores were not particularly high, especially in Dynkin’s Mathematical Analysis class:

The scores vary from 12 to 65 (out of hundred). Everyone who scored below 42 has dropped out. 

My score is 42.

Time to drop out, then.

So, I went to Bill Maxwell, who was Graduate Faculty Representative, with the Add/Drop form for him to sign. He tore it up:

Did you try paying attention in class and reading the text book?

No.

Why don’t you give that a shot?

So, I did. I mean, I read the text book, not drop out of the class. After the final exam, I went to the TA to collect my exam to see how I scored:

I don’t have your exam.

What do you mean? I took the exam, you were the proctor and I handed it to you a few days back.

Well, I don’t have it. Go talk to Professor Dynkin.

I ran up to Dynkin’s office, a couple of flights up:

There you are. I was waiting for you.

Why?

You scored the highest in the final exam, not just this year, but across the last many years. Please sit down.

As I sat down, I noticed a black-and-white photograph on the wall, of a young man playing soccer, with a happy face and a head full of hair.

What happened to you? You seemed like a happy fellow when you were young. Of course, you have also lost all the hair.

Dynkin (his eyes light up, and he smiles, yes, smiles, the first I have seen all semester!):

That is not me. That is my PhD advisor. Kolmogorov.

The Kolmogorov? He was a happy fellow?

Yes. He was also a great advisor. Which brings me to you.

Why?

I was wondering if you would consider transferring to the Math department and having me as your PhD advisor.

No! If I wanted to remain poor, I would have stayed in India. I came to do Operations Research in the US because of the promise of applying mathematical methods to solve practical problems, and thereby, giving me an opportunity not to be poor forever. 

This brings me to Jack Muckstadt.

1987. The Princess Bride. No Way Out. The Untouchables. Fatal Attraction. Wall Street.

Jack taught the Inventory Theory course. A reference text-book was (the very uninspiring) Hadley and Whitin. Much of the course was on simple models, single product, uncapacitated, facing Poisson demands, sometimes multi-echelon, but even in that situation, it was mostly a sequential single stage calculation transmitted across stages.

Although Jack himself is an energetic lecturer, and has passion for the topic, the subject material was inherently as intellectually shallow as it was practically useless. And then, in one of the lectures, Jack said something that electrified me:

There is more than one Trillion dollars of inventory in the world. Maybe even two Trillion. If someone can optimize it, even a little bit, the savings would be in Billions, and the person who could do that would become a multi-millionaire.

Mark Twain:

The two most important days in your life are the day you are born and the day you find out why.

1988. Die Hard. Cinema Paradiso. Mississippi Burning. Rain Man. The Accused.

The highlight of 1988 was my (first) summer internship, at Bell Labs (Holmdel, NJ), where I met Paul Glasserman.

1989. When Harry Met Sally. Sex, Lies and Videotape. Batman. Do the Right Thing. Dead Poets Society.

I decided to do my PhD thesis in stochastic models, and rather than work with Markovian or other restrictive assumptions, I decided to study them using sample path methods, that would generate results that hold with good generality. My first paper on this topic, single authored, is in Management Science.

1990. Miller’s Crossing. Total Recall. Presumed Innocent. Awakenings. Jacob’s Ladder.

I had a summer internship, my second, at IBM TJ Watson (Yorktown Heights). I did not enjoy the work, but the highlight was that I met Pasumarti Kamesam, who noticed how unhappy I was with the project (that I felt was intellectually shallow and not particularly useful 😒).

1991. Boyz n the Hood. Silence of the Lambs. Thelma & Louise. City Slickers. JFK.

Kamesam also was not particularly happy at Watson, I gathered later, and so had transferred to IBM Worldwide Headquarters (Somers). This was my third summer internship, and it was great.

This is when I started thinking carefully about capacitated, discrete-time, stochastic inventory models, and wrote my first paper (also single authored) on this topic, where I reframed the study of such models in terms of shortfalls. 

1992. Basic Instinct. A Few Good Men. The Last of the Mohicans. Scent of a Woman. Aladdin.

1993. The Fugitive. Jurassic Park. Philadelphia. In the Name of the Father. Schindler’s List.

Applying the sample path method to multi-echelon models, repurposing IPA derivative (from continuous time queuing models to discrete-time, capacitated inventory models), Paul and I wrote this Management Science paper and this Operations Research paper.

1996. Fargo. Scream. Mission Impossible. Bound. Primal Fear.

My first PhD student wins Nicholson Prize, for applying IPA and studying postponement using Vanilla Boxes (with IBM product line as an industrial example), in this Management Science article.

1997. Austin Powers. The Full Monty. Tomorrow Never Dies. Life is Beautiful. Grosse Pointe Blank.

George Cusack of Caterpillar approached me to design a new supply chain for them. I decided to use IPA. This led to the Fortune Magazine article that was widely read, including by senior executives at Deere, in addition to this Operations Research paper.

2000. Memento. Crouching Tiger, Hidden Dragon. Erin Brockovich. Wonder Boys. O Brother, Where Art Thou?

I founded SmartOps Corporation and created the market for Enterprise Inventory Optimization (EIO) software.

2005. Munich. Syriana. Batman Begins. Cache. The Constant Gardner.

Deere saved $1 Billion+ in inventory using SmartOps EIO software.

2006. The Prestige. The Last King of Scotland. The Queen. The Illusionist. Casino Royale.

SmartOps becomes an Endorsed Business Solution (EBS) of SAP.

2009. The Hangover. Hurt Locker. Inglorious Basterds. An Education. Up in the Air.

SmartOps becomes a Solution Extension (Sol-Ex) of SAP, also called Tier-1 partnership. This is the Darden Case on SmartOps (now resold by HBS). 

2013. Blue is the Warmest Color. The Wolf of Wall Street. Spring Breakers. Captain Phillips. American Hustle.

SAP acquires SmartOps.

2017. Get Out. Three Billboards Outside Ebbing. Wonder Woman. Logan. Darkest Hour.

Elected to the National Academy of Engineering, for developing and commercializing innovative methods for optimizing supply chains.

Thank you, Jack. See you on Zoom tomorrow.