TY - JOUR
T1 - A practical assessment of risk-averse approaches in production lot-sizing problems
AU - Alem, Douglas
AU - Oliveira, Fabricio
AU - Peinado, Miguel Carríon Ruiz
PY - 2019/5/28
Y1 - 2019/5/28
N2 - This paper presents an empirical assessment of four state-of-the-art risk-averse approaches to deal with the capacitated lot-sizing problem under stochastic demand. We analyse two mean-risk models based on the semideviation and on the conditional value-at-risk risk measures, and alternate first and second-order stochastic dominance approaches. The extensive computational experiments based on different instances characteristics and on a case-study suggest that CVaR exhibits a good trade-off between risk and performance, followed by the semideviation and first-order stochastic dominance approach. For all approaches, enforcing risk-aversion helps to reduce the cost-standard deviation substantially, which is usually accomplished via increasing production rates. Overall, we can say that very risk-averse decision-makers would be willing to pay an increased price to have a much less risky solution given by CVaR. In less risk-averse settings, though, semideviation and first-order stochastic dominance can be appealing alternatives to provide significantly more stable production planning costs with a marginal increase of the expected costs.
AB - This paper presents an empirical assessment of four state-of-the-art risk-averse approaches to deal with the capacitated lot-sizing problem under stochastic demand. We analyse two mean-risk models based on the semideviation and on the conditional value-at-risk risk measures, and alternate first and second-order stochastic dominance approaches. The extensive computational experiments based on different instances characteristics and on a case-study suggest that CVaR exhibits a good trade-off between risk and performance, followed by the semideviation and first-order stochastic dominance approach. For all approaches, enforcing risk-aversion helps to reduce the cost-standard deviation substantially, which is usually accomplished via increasing production rates. Overall, we can say that very risk-averse decision-makers would be willing to pay an increased price to have a much less risky solution given by CVaR. In less risk-averse settings, though, semideviation and first-order stochastic dominance can be appealing alternatives to provide significantly more stable production planning costs with a marginal increase of the expected costs.
KW - lot-sizing
KW - two-stage stochastic programming
KW - risk aversion
KW - CVaR
KW - semideviation
KW - first-order stochastic dominance
KW - second-order stochastic dominance
UR - http://www.scopus.com/inward/record.url?scp=85084358776&partnerID=8YFLogxK
U2 - 10.1080/00207543.2019.1620364
DO - 10.1080/00207543.2019.1620364
M3 - Article
AN - SCOPUS:85084358776
SN - 0020-7543
VL - 58
SP - 2581
EP - 2603
JO - International Journal of Production Research
JF - International Journal of Production Research
IS - 9
ER -