Operational planning under uncertainty

This paper presents a novel approach for the incorporation of future plan feasibility and potential economic risk in planning problems under uncertainty. It is based on the concepts of plan flexibility and regret as measures of the impact of uncertainty on the future plan operation and economics. For two-period linear planning models, analytical expressions of flexibility and regret as functions of the uncertain parameters are obtained with which an optimal plan can be determined that maximizes an expected profit while ensuring operability and monitoring financial risk. An important feature of this new planning framework is that, in contrast to previous approaches, it neither requires discretization of the uncertainty nor is centered on worst-case considerations. An example is presented to illustrate the steps of the algorithmic procedure.