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Investment in production resource flexibility: An empirical investigation of methods for planning under uncertainty
Author(s) -
Katok Elena,
Tarantino William,
Harrison Terry P.
Publication year - 2003
Publication title -
naval research logistics (nrl)
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.665
H-Index - 68
eISSN - 1520-6750
pISSN - 0894-069X
DOI - 10.1002/nav.10059
Subject(s) - flexibility (engineering) , investment (military) , production (economics) , resource (disambiguation) , operations research , aviation , computer science , investment decisions , environmental economics , resource planning , risk analysis (engineering) , business , operations management , industrial organization , economics , microeconomics , environmental resource management , engineering , aerospace engineering , politics , computer network , management , political science , law
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). © 2003 Wiley Periodicals, Inc. Naval Research Logistics, 2003