Matching Supply and Demand: The Value of a Second Chance in Producing Hybrid Seed Corn

Abstract

This paper considers a production-scheduling problem arising when there are random yields and demands as well as two sequential production periods before demand occurs. A typical instance is the production of seed corn. The paper makes three contributions. First, we verify that the objective function for the problem is smooth and concave so that optimal solutions are easily computed. Second, by examining data that represents actual costs, prices, and yields encountered in the seed corn industry, we gain some insight into the value that the second production period provides. Third, for a representative sample of hybrids from a major seed corn producer, we show that margins could be enhanced considerably by using the model. The results of this paper will assist seed corn producers in making production-scheduling decisions.