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Investment in production resource flexibility: An empirical investigation of methods for planning under uncertainty

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  • Elena Katok
  • William Tarantino
  • Terry P. Harrison

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). © 2003 Wiley Periodicals, Inc. Naval Research Logistics, 2003

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  • Elena Katok & William Tarantino & Terry P. Harrison, 2003. "Investment in production resource flexibility: An empirical investigation of methods for planning under uncertainty," Naval Research Logistics (NRL), John Wiley & Sons, vol. 50(2), pages 105-129, March.
    • Handle: RePEc:wly:navres:v:50:y:2003:i:2:p:105-129
    DOI: 10.1002/nav.10059
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