Data and Risk Analytics for Production Planning

Liao Wang and David D. Yao

Foundations and Trends(R) in Technology, Information and Operations Management, 2019, vol. 12, issue 2-3, 201-218

Abstract: We examine the classical productional planning model, where a capacity decision that has to be made at the beginning of the planning horizon is the primary means to protect against demand uncertainty. We provide a critique on the model focusing on its profit maximizing objective, its underlying assumptions on demand and related forecasting scheme, and its overall business relevance (or the lack thereof); and we do so in the context of data, risk and analytics. Specifically, we will consider minimizing a shortfall risk relative to a profit target, with a demand model that captures impacts from the financial market and can be learned from data sets that are application specific. With a jointly optimized production and hedging strategy, we show the new model outperforms traditional approaches in risk mitigation as well as in expected profit.

Keywords: Risk management; Hedging; Operational risk; Supply chain finance (search for similar items in EconPapers)
JEL-codes: G32 M11 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:now:fnttom:0200000086

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