Grant: Discovery Grants Program - Individual

Inventory, capacity and revenue management are some of the fundamental areas of research and practice in operations management. The main research questions of interest in this field are about determining optimal inventory and capacity related decisions as well as polices to increase the revenue of a profit maximizing entity in a wide set of instances which are of great significance to the Canadian economy. Examples include Health care, manufacturing, retail and financial service organizations such as banks and other investment firms. The settings of the above problems have certain common themes. These include uncertainty of some kind , limited capacity, information evolving over time and the need for dynamic decisions made over time with the overall objective of maximizing/minimizing certain returns on investment (profits, costs, throughput for certain service classes etc.). Dealing with these problems naturally involve at least two mathematical tasks, i.e., forecasting of the uncertainty and optimizing a suitable objective. These two tasks are distinct, but are related to each other. Despite the prevalence of these problems, we find that repeatedly firms and decision makers resort to simple sub-optimal rules of thumb to perform the above two tasks which often result in mediocre outputs. This is costly to the economy and our society. That is, often there is ample room to improve the solutions used by practitioners. The reasons for this are manifold. First of all, often, these are extremely hard mathematical optimization problems for which optimal or near optimal solutions that are easy to implement in practice are not easily found. The forecasting problem (i.e., resolving the uncertainty) is often not an easy task. Despite the availability of large amounts of data, complex systems which are intrinsically highly non linear often yield forecasts with large errors. Often there is little theoretical or practical guidance on how much to forecast and what heuristics to use in the optimization. We find this as a common phenomenon with our work with several partner firms spanning industries such as various hospitals, agriculture, retail, and other services. This leads to the potential of deriving solutions and techniques that perform well in practice as well as have attractive theoretical properties. In the last several years, we have made some progress in this front.  Our understanding of these problems has moved forward from a theoretical sense and has also yielded solution procedures that are somewhat easy to implement and outperform existing heuristics. There is still significant potential to combine, extend and develop new techniques and theory to combine heuristics to stochastic optimization with forecasting.  Expected outcomes will be research publications in top tier research journals in my field as well as solution procedures that will be implemented in practice.