Investment in Production Resource Flexibility: An Empirical Investigation of Methods for Planning Under Uncertainty

Naval Research Logistics, Vol. 50, 2003

25 Pages Posted: 28 Feb 2005

See all articles by Elena Katok

Elena Katok

University of Texas at Dallas

Abstract

We examine several methods for evaluating resource acquisition decisions under uncertainty. Traditional methods may underestimate equipment benefit when part of this benefit comes from decision flexibility. We develop a new, practical method for resource planning under uncertainty, and show that this approach is more accurate than several commonly used methods. We successfully applied our approach to an investment problem faced by a major firm in the aviation information industry. Our recommendations were accepted and resulted in estimated annual savings in excess of $1 million (US).

Keywords: manufacturing flexibility, stochastic programming, sampling6

Suggested Citation

Katok, Elena, Investment in Production Resource Flexibility: An Empirical Investigation of Methods for Planning Under Uncertainty. Naval Research Logistics, Vol. 50, 2003, Available at SSRN: https://ssrn.com/abstract=673423

Elena Katok (Contact Author)

University of Texas at Dallas ( email )

Jindal School of Management
800 W. Campbell Dr.
Richardson, TX 75080
United States

HOME PAGE: http://www.utdallas.edu/~ekatok/

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