Theory-Driven Practical Approach to Integrate R&D and Production Planning for Portfolio Management in Agribusiness

Saurabh Bansal (), Genaro J. Gutierrez () and Mahesh Nagarajan ()
Additional contact information
Saurabh Bansal: Pennsylvania State University, State College, Pennsylvania 16802
Genaro J. Gutierrez: University of Texas at Austin, Austin, Texas 78712
Mahesh Nagarajan: University of British Columbia, Vancouver, British Columbia V6T 1Z2, Canada

Interfaces, 2021, vol. 51, issue 5, 332-346

Abstract: Agribusiness firms, with an eye toward increasing population and evolving weather patterns, are investing heavily into developing new varieties of staple crops that can provide higher yields and are robust to weather fluctuations. In this paper, we describe a multiyear effort at Dow Agrosciences (now Corteva) to manage its seed corn portfolio, which includes several hundred seeds and is valued at more than $1 billion. The effort had two mutually interacting parts: (1) developing a decision-analytic theory to estimate the production yield distributions for new seed varieties from discrete quantile judgments provided by plant biology experts and (2) developing an optimization protocol to determine Dow's annual production plan for the seed portfolio with the flexibility of backup production in South America, under production yield uncertainty. The first part, owned by the research and development (R&D) function, provides yield probability distributions as inputs to the optimization protocol of the second part, which the production function owns. The results of the optimization problem, which include information about the attractiveness of specific future varieties, are returned to R&D. Both parts incorporate contextual details specific to this industry. In this paper, we show the optimality of linear policies for both problems. Additionally, the linear policies have many attractive structural properties that continue to hold for the more complex instances of the problems. A major strength of the theory we developed is that it is implementable in a transparent fashion, providing managers with a user-friendly, real-time decision support tool. The implementation of the theory developed has led to significant monetary and managerial benefits at Dow.

Keywords: agriculture analytics; production optimization; decision-analytic theory (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1287/inte.2021.1080 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:orinte:v:51:y:2021:i:5:p:332-346

Access Statistics for this article

More articles in Interfaces from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().