Data is now unanimously considered a key firm asset for enabling better operational decisions. However, data-driven decisions can inadvertently expose private data, leaving firms vulnerable to unforeseen danger. How to manage data security risks by protecting data from being inferred from observable decisions thus becomes an important question. In this paper, we focus on data security in supply chains due to their data-intensive nature. Specifically, we examine a data-driven contextual newsvendor problem. To quantify and ensure data security, we adopt the notion of differential privacy, a mathematically rigorous measure of data security that limits an attacker’s inference accuracy. Employing convolution smoothing and noise injection, we propose several differentially private algorithms that provably guarantee both data security and asymptotic optimality with (near) optimal rates. In the non-asymptotic regime, we further identify three drivers of the cost of data security; namely, dataset size, context, and number of products. This finding suggests that gathering more data, collecting detailed context, and pooling data from multiple products can lower data security cost. Lastly, we examine the impact of a newsvendor’s private algorithms on supply chain partners. We discover additional distortion to the demand signaling process and lower profit share for an upstream supplier.

Papers:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4654269

Geoffrey Chua is the Academic Director of the Nanyang MBA and Associate Professor of Operations Management at Nanyang Technological University in Singapore. His research spans the areas of supply chain management, sustainable operations and operations-marketing interface. He has published in leading journals such as Operations Research, Production and Operations Management (POM), IISE Transactions and European Journal of Operational Research. He has been appointed as Associate Editor of Networks, and to the editorial review boards of POM and Computers & Operations Research. He was awarded the Research Excellence Award by NBS and has attracted more than S$1.4 million in research funding. Geoffrey has taught operations management, supply chain management, service operations, and management science at the PhD, EMBA, PMBA, MBA, MSc and undergraduate levels. He received the Koh Boon Hwee Honoured Faculty Award and the Teaching Excellence Award from NBS. He also actively consults for organizations such as Hewlett-Packard, Alstom, Royal Golden Eagle Group, UPS Singapore, Tan Tock Seng Hospital, and Singapore Red Cross. He is Fellow of the Renaissance Engineering Programme (REP) since 2016 and was previously Senator of the NTU Academic Council, Academic Director for the Nanyang EMBA, Deputy Director for REP and Honorary Treasurer of the Operational Research Society of Singapore.

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