The award-winning paper, “Theory-driven Practical Approach to Integrate R&D and Production Planning for Portfolio Management in Agribusiness,” describes agribusiness firms with an eye toward increasing population and evolving weather patterns, investing heavily into developing new varieties of staple crops that can provide higher yields and are robust to weather fluctuations. The team worked with Dow Agrosciences (now Corteva) over a period of five years to manage its seed corn portfolio, which includes several hundred seeds that cater to specific regions in the continental U.S. and is valued at more than $1 billion.
The effort had two interacting parts: (1) developing a decision analytic theory to estimate the production yield distributions for new seed varieties from discrete quantile judgments provided by plant biology experts, and (2) developing an optimization protocol to determine Dow’s annual production plan for the seed portfolio with a flexibility of backup production in South America, under production yield and demand uncertainty. The first part was needed due to the sparsity of the yield data available during the research and development (R&D) process for new seeds.
It was owned by the R&D function at the firm and provided yield probability distributions as inputs to the optimization protocol of the second part, which was owned by the production function. This optimization protocol navigated several hundred uncertainties in yields and demands for the seeds in the portfolio to determine the area that Dow should use in North America and South America for growing each seed.
The results of the optimization problem informed the R&D function about the attractiveness of specific future varieties and helped structure its research pipeline. The team developed new theoretical results for both parts that were also easy to implement in the industrial environment at Dow. The implementation of the developed theory led to significant monetary and managerial benefits at Dow and underscores the importance of human elements of decision making at firms.