informs Vol. 38, No. 4, July–August 2008, pp. 225–227 issn 0092-2102 eissn 1526-551X 08 3804 0225
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doi 10.1287/inte.1080.0384 © 2008 INFORMS
Introduction: The Use of Spreadsheet Software in the Application of Management Science and Operations Research Larry J. LeBlanc
Owen Graduate School of Management, Vanderbilt University, Nashville, Tennessee 37203,
[email protected]
Thomas A. Grossman
School of Business and Management, University of San Francisco, San Francisco, California 94117-1045,
[email protected]
Spreadsheets can play an important role in the MS/OR practitioner’s toolkit. This is because they are an effective software development platform, supporting powerful commercial MS/OR add-ins and providing advantages in deploying models to clients. Spreadsheets also provide access to the power of MS/OR for large numbers of unsophisticated end-user modelers. In this special issue, we highlight the benefits of spreadsheet MS/OR across 10 different high-impact applications. Key words: philosophy of modeling; spreadsheets; optimization applications; simulation applications.
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preadsheets can play an important role in the MS/OR practitioner’s toolkit because they are an effective software development platform, support powerful commercial MS/OR add-ins, and provide advantages in deploying models to clients. The spreadsheet programming language can be a desirable software development platform for MS/OR applications. In the language of software engineering, the spreadsheet is a rapid-development language, a fourth-generation programming language, and an integrated development environment (McConnell 1996; Grossman et al. 2008). This means that the spreadsheet programming language can be an appropriate choice for projects requiring fast deployment or high developer productivity. There is a trade-off in that applications written in a spreadsheet language (like all rapid-development languages) can be more difficult to maintain or scale up. Powerful commercial add-ins for optimization, Monte Carlo simulation, decision analysis, and other techniques (Grossman 2002), plus the built-in VBA programming language (LeBlanc and Galbreth 2007), enable serious MS/OR work in spreadsheets. (MS/OR professionals should be aware that the limitedfunctionality Solver that comes free with Excel can easily be upgraded to professional-quality versions.)
Spreadsheets provide unique advantages for deploying MS/OR models to clients. Unlike most OR software, a spreadsheet is available on every desktop. Spreadsheets are often used for critically important business purposes (Croll 2005, Grossman et al. 2008) and thus enjoy a high level of acceptance by nontechnical managers who are often the ultimate consumers of MS/OR applications. In addition, spreadsheets with MS/OR add-ins provide millions of end users the ability to create models and harness the power of MS/OR. For example, Oggier et al. (2005) explain how a multinational corporation deployed MS/OR to end users around the world. End-user modelers are an important OR constituency, and although their development efforts and successes can be invisible to MS/OR professionals, they will undoubtedly play an important role in the future of the field. This special issue highlights the role of spreadsheets in MS/OR applications by traditional practitioners and by the emerging class of end-user modelers. We present below the highlights of these papers. Analyzing Supply Chains at HP Using Spreadsheet Models: Amaral and Kuettner review spreadsheet techniques and approaches that they used to 225
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analyze supply chains at HP and to manage spreadsheet limitations. They discuss how they employed many of Excel’s advanced spreadsheet and VBA capabilities while minimizing unnecessary modeling complexity. Spreadsheet Models for Inventory Target Setting at Procter & Gamble: Farasyn, Perkoz, and Van de Velde describe how Procter & Gamble used spreadsheet models across the company to determine optimal inventory levels for required customer service levels, subject to the characteristics and constraints of particular supply chains. The models have contributed to inventory reductions exceeding $350 million and significant intangible benefits to P&G. Because the spreadsheet models are easy to use and share, they became the standard tool for inventory setting at P&G and are used by hundreds of supply chain planners worldwide. Lockheed Martin Space Systems Company Optimizes Infrastructure Project-Portfolio Selection: Gurgur and Morley describe a chance-constrained optimization model for selecting infrastructure projects at Lockheed Martin Space Systems Company. Their model uses multiattribute utility theory to assure that high-value projects are selected while not exceeding the budget constraint. Disseminating Emergency Preparedness Planning Models as Automatically Generated Custom Spreadsheets: Herrmann reports on a project funded by the Centers for Disease Control to allow public health officials to plan for emergency clinics in response to a sudden epidemic or bioterrorism attack. He created a spreadsheet application that allows users with negligible MS/OR experience to create and use customized analytical capacity planning and queueing network models without the assistance of an MS/OR professional. His tool uses Excel to generate automatically a custom spreadsheet model for the user’s unique situation. A Spreadsheet Implementation of an Ammunition Requirements Planning Model for the Canadian Army: Hurley and Balez developed a spreadsheet implementation of a model for determining dynamic ammunition requirements for Canadian Army training programs. The result enabled the Army to bring budgeted expenses in line with actual expenses. They
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provide insights into the importance of developing client intuition. Hypo International Strengthens Risk Management with a Large-Scale, Secure SpreadsheetManagement Framework: Jafry, Marrison, and Umkehrer-Neudeck discuss spreadsheet risk in the commercial real estate loan industry. Their Excelbased simulation model assesses the potential impact of macroeconomic events on the default risk of a portfolio of loans. Their innovative technology enables business logic to be coded in spreadsheets by domain experts, with source code control, audit trail, and very fast C++ simulation performed on a central server. The simulations can be run by distributed users who do not have access to the spreadsheet source code. Optimal Trading of ETFs: Spreadsheet Prototypes and Applications to Client-Server Applications: Kumiega and Van Vliet describe the spreadsheetdevelopment methodology used by quantitative analysts and traders in financial markets. Their spreadsheet used regression and Excel’s Solver to determine the optimal investment of a firm’s risk capital. They provide a roadmap for rapid prototyping with user involvement and multiple decision points culminating in porting the spreadsheet code to C++ to achieve benefits in run-time, security, and maintainability. Spreadsheet Decision-Support Tools: Lessons Learned at Hewlett-Packard: Olavson and Fry discuss their experiences in building and applying spreadsheet-based decision-support tools. Using examples from Hewlett-Packard in forecasting, planning, procurement, and product management, they discuss lessons learned for creating reusable spreadsheet tools to support fact-based decision making, and using spreadsheets as the front- and back-end user interface for models coded in a procedural language. This paper is notable for providing a highlevel road map for approaching OR-driven change projects (independent of spreadsheets) with options ranging from “no analytics” because the organization is not ready, through to “transferable tool.” Spreadsheet Model Helps to Assign Medical Residents at the University of Vermont’s College of Medicine: Ovchinnikov and Milner describe a spreadsheet model that MBA students developed.
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This is an optimization model that replaces the manual method of assigning medical residents in radiology to on-call and emergency rotations at the University of Vermont’s College of Medicine. They discuss an approach that end-user practitioners can use to create such spreadsheet optimization models. This class of scheduling problem is widespread in many industries and could provide a significant opportunity for student projects. Integrating Excel, Access, and Visual Basic to Deploy Performance Measurement and Evaluation at the American Red Cross: Pasupathy and MedinaBorja describe the use of data envelopment analysis to make resource-allocation recommendations to help American Red Cross managers evaluate the performance of different chapters. This paper describes the use of Microsoft Excel, Premium Solver, Visual Basic for Applications, and Microsoft Access to formulate, automatically program, and solve 4,000 different linear-programming models. We would like to gratefully acknowledge the support of Interfaces editor in chief Jeff Camm, manuscript
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editor Alice Mack, and a host of dedicated referees and authors who made this issue possible. We hope that you enjoy reading about these outstanding examples of spreadsheets as platforms for developing MS/OR applications. If these articles motivate you to investigate the opportunities for better using spreadsheets in your practice, research, or teaching, then we will view this special issue as a success. References Croll, G. 2005. The importance and criticality of spreadsheets in the city of London. Retrieved May 1, 2008, http://sprig.section. informs.org/sprigfiles/Croll05.pdf. Grossman, T. 2002. Spreadsheet add-ins for OR/MS. OR/MS Today 29(4 (August)) 46–51. Grossman, T., V. Mehrotra, Ö. Özlük. 2008. Lessons from missioncritical spreadsheets. Comm. Association for Inform. Systems 20(60) 1009–1042. LeBlanc, L., M. Galbreth. 2007. Implementing large-scale optimization models in Excel using VBA. Interfaces 37(4) 370–382. McConnell, S. 1996. Rapid Development. Microsoft Press, Redmond, WA. Oggier, C., E. Fragnière, J. Stuby. 2005. Nestlé improves its financial reporting with management science. Interfaces 35(4) 271–280.
