Supply chain management production line: Risk assessment

A manufacturer is facing an order that needs to be satisfied in full. The common objective function usually used in conjunction with this process is the minimization of expected costs. However, sometimes the manufacturer may want to consider a deviation from this ´optimal´ cost-minimizing process, if the risk of requiring additional production runs could be dramatically reduced, i.e., the manufacturer might not always be risk neutral. This study presents a technique to calculate the risk involved in various production processes with different yield distributions.