- Supply Chain Management
- Supply Chain Contracting
- Environmental Regulation
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Associate Professor Gal Raz teaches Operations and Supply Chain Management at Ivey. He received his Ph.D. in business and a master's degree focusing on public policy from Stanford University. His research centres on supply-chain management and sustainable operations, with a special focus on pricing, remanufacturing, innovation and government environmental regulations. His research and work has been published in academic journals such as Management Science, Production and Operations Management (POM) and IEEE Transactions, and business magazines such as Strategy and Business and the Washington Post. He serves on the editorial board of POM and as a referee for Management Science, Operations Research, and Manufacturing and Service Operations Management (M&SOM).
Throughout his career, Professor Raz has been involved in leadership roles in professional organizations. From 2007 to 2009, he served as the president of the Junior Faculty Interest Group (JFIG) at INFORMS and received the INFORMS Moving Spirit Service Award for his work with JFIG. In 2010, he was the co-chair of the SCM M&SOM SIG conference in Israel, and in 2012 co-chaired POM's sustainable operations college mini-conference in Chicago. Professor Raz is the current president of POM's sustainable operations college, a member of POM' s board, and the VP of Meetings for M&SOM. Raz was involved in numerous consulting projects with many companies on topics relating to supply-chain management, innovation and sustainable operations in Australia, the United States and Israel.
Prior to joining the Ivey, he was on the faculty of the Darden Graduate School of Business at UVA and the Australian Graduate School of Management in Sydney. He also taught in several other schools such as Kellogg School of Management, and IDC and the Technion in Israel.
- Operations Management, HBA Core
- Operations Management, EMBA Core
- PHD, Operations, Informations and Technology, Stanford University
- M.S., Management Science and Engineering, Stanford University
- B. Sc. Industrial Engineering and Management, Israel Institute of Technology
Recent Refereed Articles
Ovchinnikov, A.; Pun, H.; Raz, G.,
(Forthcoming), "The impact of inventory risk on market prices and profits", Decision Sciences.
Abstract: Firms often must procure inventory/capacity before knowing what the demand will be, so there is a potential for a mismatch between inventory and demand, the “inventory risk.” We show that because of inventory risk, an increase in the number of competitors can lead to an increasing trend in market prices. Furthermore, we show that, ceteris paribus, because of how inventory risk impacts competitive behavior, firms may prefer to incur inventory risk rather than to avoid it. To illustrate the robustness of our results, we establish these findings using three complementary methodologies: (i) using data from a classroom experiment, (ii) using a quantal response equilibrium simulation to capture realistic irrationalities in managerial decisions under competition, and (iii) using a fully-rational Nash equilibrium model to capture the impact of the competition per se. That all three methods lead to identical qualitative findings reinforces the main message of our paper: inventory risk reverses the standard intuition for how an increase in the number of competitors impacts prices.
Raz, G.; Souza, G.,
2018, "Recycling as a Strategic Supply Source", Production and Operations Management, May 27(5): 902 - 916.
Abstract: We investigate how recycling can be a strategic source of supply in the presence of a changing supply market. This research is inspired by the metal cutting tools industry, where challenges regarding a key raw material present an opportunity for the manufacturers to create an alternative supply source by recycling. In this paper, there is a virgin material market that supplies two manufacturers di erentiated in their recycling ability. The problem is formulated as a game, where the manufacturers rst make a decision to recycle or not, and then decide on their respective production quantities, and recycling rates. Depending on the xed recycling cost relative to the unit cost of the virgin material, as well as the recycling cost structure of the two manufacturers, there are four possible equilibria: both manufacturers recycle, neither manufacturer recycles, only the more recycling-capable manufacturer recycles, or a scenario with two Nash equilibria (either manufacturer recycles whereas the other does not). We show that recycling is indeed a strategic supply source as recycling resulting in higher quantities and pro ts. Interestingly, a manufacturer may recycle less if the unit cost of the virgin material increases, at high recycling rates. This result emphasizes the importance of carefully modeling the recycling cost structure. Although a recycled unit has necessarily a lower life-cycle environmental impact than a unit made of virgin materials, the industry-wide environmental impact can be higher in a recycling scenario due to higher production quantities overall. Welfare, however, is higher with recycling.
Link(s) to publication:
Raz, G.; Ovchinnikov, A.; Blass, V.,
2017, "Economic, Environmental and Social Impact of Remanufacturing in a Competitive Setting", IEEE Transactions on Engineering Management, November 64(4): 476 - 490.
Abstract: This paper studies the environmental and social trade-offs of remanufacturing for product+service firms under competition. We use an analytical model and a behavioral study that together incorporate demand cannibalization from multiple customer segments across the competing firms’ product lines. We measure firms’ profits, consumer surpluses, environmental impacts and environmental costs along the products lifecycles in the resultant equilibria with and without remanufacturing. We show that competition intensifies the tension between increased profit and worsened environmental impact from market expansions caused by remanufacturing identified by prior research in the case of monopoly. But bringing in the social dimension leads to an overall positive assessment: remanufacturing creates additional consumer surplus which compensates for the cost of the environmental impact. In other words, we found strong support that remanufacturing is beneficial for the society.
Link(s) to publication:
Kraft, T.; Raz, G.,
2017, "Collaborate or Compete: Examining Manufacturers' Replacement Strategies for a Substance of Concern", Production and Operations Management, September 26(9): 1646 - 1662.
Abstract: The recent proliferation of media reports on substances of concern has increased consumer fears, sparked scientific debate, and highlighted the need for stronger chemical regulations. When a substance of concern is identified (e.g., bisphenol-A (BPA) in reusable water bottles), manufacturers face difficult trade-offs in deciding whether to proactively replace the substance in their products or to defer replacement and wait to see if regulation occurs. In this paper, we examine when opportunities exist for manufacturers to avoid competitively replacing (i.e., making their replacement decisions on their own), and instead, collaborate to replace a substance of concern. We model a vertically differentiated market consisting of a high-end manufacturer and a low-end manufacturer, both of whom sell a product that contains a substance of concern. Our analysis investigates how market dynamics (competition and consumer preferences) and external factors (replacement costs and regulatory uncertainty) influence manufacturers’ collaboration, replacement, and pricing decisions. We find that when the manufacturers do not collaborate, the high-end manufacturer can use the presence of the substance of concern to dominate the market. Collaboration is possible when either there is a shared fixed cost savings for both manufacturers or the low-end manufacturer pays a larger portion of the shared cost in order to motivate the high-end manufacturer to collaborate. From a consumer perspective, although collaboration reduces consumer exposure to the substance of concern, it can decrease consumer surplus when the replacement substance is very expensive.
Link(s) to publication:
Raz, G.; Ovchinnikov, A.,
2015, "Coordinating Pricing and Supply of Public Interest Goods Using Rebates and Subsidies", IEEE Transactions on Engineering Management, February 62(1): 65 - 79.
Abstract: This paper presents a stylized framework for analyzing the design of government incentives for public interest goods (goods with externalities, such as electric vehicles.) We extend the newsvendor model with pricing to account for the consumption externality inherent in public interest goods and analyze the governments ability to coordinate their pricing and supply through the use of rebates and subsidies. Our model allows for goods with both positive and negative externalities, and considers three government intervention mechanisms: the joint mechanism that uses both subsidies and rebates, and two simplified mechanisms that use only rebates or only subsidies. The goal of the intervention is to coordinate the system in order to achieve the maximal welfare, which in our model consists of the firms profit, consumer surplus, and externality benefit net the government cost. We find that the joint mechanism coordinates the system, but results in a negative subsidy (i.e., a tax) unless the externality is very small. The simplified mechanisms mostly result in positive rebates and subsidies, but generally do not coordinate the system. We apply our model to the case of Chevy Volt, a leading electric vehicle in North America manufactured by General Motors. We estimate all model parameters from industry data and present a comprehensive numerical study that compares the current government incentives with those suggested by our model. We find that while the current incentives are structurally suboptimal, the resultant welfare loss under the rebate-only mechanism is very small, while under the subsidy-only mechanism it is quite large.
Ovchinnikov, A.; Blass, V.; Raz, G.,
2014, "Economic and Environmental Assessment of Remanufacturing Strategies for Product-Service Firms", Production and Operations Management, September 23(5): 744 - 761.
Abstract: This article provides a data-driven assessment of economic and environmental aspects of remanufacturing for product + service firms. A critical component of such an assessment is the issue of demand cannibalization. We therefore present an analytical model and a behavioral study which together incorporate demand cannibalization from multiple customer segments across the firm's product line. We then perform a series of numerical simulations with realistic problem parameters obtained from both the literature and discussions with industry executives. Our findings show that remanufacturing frequently aligns firms' economic and environmental goals by increasing profits and decreasing the total environmental impact. We show that in some cases, an introduction of a remanufactured product leads to no changes in the new products' prices (positioning within the product line), implying a positive demand cannibalization and a decrease in the environmental impact this provides support for a heuristic approach commonly used in practice. Yet in other cases, the firm can increase profits by decreasing the new product's prices and increasing salesa negative effective cannibalization. With negative cannibalization the firm's total environmental impact often increases due to the growth in new production. However, we illustrate that this growth is nearly always sustainable, as the relative environmental impacts per unit and per dollar rarely increase.
Link(s) to publication:
Raz, G.; Druehl, C. T.; Blass, V.,
2013, "Design for the Environment Life Cycle Approach Using a Newsvendor Model", Production and Operations Management, July 22(4): 940 - 957.
Abstract: Introducing environmental innovations in product and process design can affect the product's cost and demand, as well as the environmental impact in different stages of its life cycle (such as manufacturing and use stages). In this article, we advance understanding on where such design changes can be most effective economically to the firm and examine their corresponding environmental consequences. We consider a profit maximizing firm (newsvendor) deciding on the production quantity as well as its environmentally focused design efforts. We focus our results along the two dimensions of demand characteristics and life-cycle environmental impact levels, specifically functional vs. innovative products, and higher manufacturing stage environmental impact vs. higher use stage environmental impact. We also discuss the environmental impact of overproduction and how it relates to the different types of products and their salvage options. We find that although the environmental impact per unit always improves when firms use eco-efficient or demand-enhancing innovations, the total environmental impact can either increase or decrease due to increased production quantities. We identify the conditions for such cases by looking at the environmentally focused design efforts needed to compensate for the increase in production. We also show that the environmental impact of overproduction plays an important role in the overall environmental impact of the firm. We conclude by applying our model to different product categories.
Link(s) to publication:
Ozer, O.; Raz, G.,
2011, "Supply Chain Sourcing Under Asymmetric Information", Production and Operations Management, January 20(1): 92 - 115.
Abstract: We study a supply chain with two suppliers competing over a contract to supply components to a manufacturer. One of the suppliers is a big company for whom the manufacturer's business constitutes a small part of his business. The other supplier is a small company for whom the manufacturer's business constitutes a large portion of his business. We analyze the problem from the perspective of the big supplier and address the following questions: What is the optimal contracting strategy that the big supplier should follow? How does the information about the small supplier's production cost affect the profits and contracting decision? How does the existence of the small supplier affect profits? By studying various information scenarios regarding the small supplier's and the manufacturer's production cost, we show, for example, that the big supplier benefits when the small supplier keeps its production cost private. We quantify the value of information for the big supplier and the manufacturer. We also quantify the cost (value) of the alternative-sourcing option for the big supplier (the manufacturer). We determine when an alternative-sourcing option has more impact on profits than information. We conclude with extensions and numerical examples to shed light on how system parameters affect this supply chain.
Link(s) to publication:
Raz, G.; Porteus, E. L.,
2006, "A Fractiles Perspective to the Joint PriceQuantity Newsvendor Model", Management Science, January 52(11): 1764 - 1777.
Abstract: Pricing and quantity decisions are critical to many firms across different industries. We study the joint pricequantity newsvendor model where only a single quantity and price decision is made, such as a fashion or holiday product that cannot be replenished and where the price is advertised nationally and cannot be changed. Demand is uncertain and sensitive to price. We develop a method for easily finding the optimal price and quantity that applies to more general cases than the usual one in which uncertainty is either additive, multiplicative, or a combination of the two. We represent a quantity by its fractile of the probability distribution of demand for a given price. We use a standard approach to approximating a given distribution with a finite number of representative fractiles and assume that these fractile functions are piecewise linear functions of the price. We identify effects that are not usually seen in a joint pricequantity newsvendor model. For example, although the optimal quantity is a decreasing function of the unit cost, the optimal price can be nonmonotone in the unit cost and we shed insight into why. We illustrate that using a simplified structure of demand uncertainty can result in substantially lower profits.
Honours & Awards
- Ivey Business School Research Merit Award (2015 – 2016)
- INFORMS Case Competition Winner (“Eastman Tritan” Case), 2013
- INFORMS “Moving Sprit” Service Award, 2009
- INFORMS Young Practitioner Connection, 2009
- Associate Professor of Business, Darden Graduate School of Business (2007 - 2015)
- Visiting Associate Professor, Kellogg School of Management, Northwestern University (2014)
- Visiting Associate Professor, Israel Institute of Technology (2010)
- Senior Lecturer, Australian Graduate School of Management (2006-2007)
- Lecturer, Australian Graduate School of Management (2002-2006)
- Supply Chain Management
- Supply Chain Contracting and Negotiation
- Environmental Regulation
- Joint Pricing and Quantity Decisions