Robust Optimization in Simulation: Taguchi and Krige Combined
Tilburg University - Center and Faculty of Economics and Business Administration
Jack P. C. Kleijnen
Tilburg University, CentER
Politecnico di Bari
October 21, 2009
CentER Discussion Paper Series No. 2009-82
Optimization of simulated systems is the goal of many methods, but most methods assume known environments. We, however, develop a `robust' methodology that accounts for uncertain environments. Our methodology uses Taguchi's view of the uncertain world, but replaces his statistical techniques by Kriging. We illustrate the resulting methodology through classic Economic Order Quantity (EOQ) inventory models. Our results suggest that robust optimization requires order quantities that differ from the classic EOQ. We also compare our latest results with our previous results that do not use Kriging but Response Surface Methodology (RSM).
Number of Pages in PDF File: 29
Keywords: Statistics, Design of experiments, Inventory-Production, Simulation, Decision analysis, Risk
JEL Classification: C0, C1, C9working papers series
Date posted: October 25, 2009
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