Risk Hedging for Production Planning

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

3 Scopus Citations
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Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)1825–1837
Journal / PublicationProduction and Operations Management
Volume30
Issue number6
Online published20 Sep 2019
Publication statusPublished - Jun 2021
Externally publishedYes

Abstract

Traditional production planning is primarily a quantity or capacity decision, which must be made at the beginning of a planning horizon before production starts. Adding to this decision a real-time control, a risk-hedging strategy carried out throughout the horizon can better mitigate the risk involved in demand volatility. We demonstrate how this can be done in terms of jointly optimizing the capacity and the hedging decisions, addressing both the mean-variance and the shortfall objectives. Solution techniques, results, and insights are highlighted. In particular, we illustrate that our approach readily accommodates data analytics and explicitly quantifies the improvement to the efficient frontier contributed by hedging. © 2019 Production and Operations Management Society

Research Area(s)

  • data analytics, hedging strategy, production risk management

Citation Format(s)

Risk Hedging for Production Planning. / Wang, Liao; Yao, David D.

In: Production and Operations Management, Vol. 30, No. 6, 06.2021, p. 1825–1837.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review