TY - JOUR

T1 - Developing and implementing a stochastic decision-support model within an organizational context

T2 - The experience

AU - Hoyland, Kjetil

AU - Ranberg, Erik

AU - Wallace, Stein W

PY - 2005

Y1 - 2005

N2 - Purpose – Discusses why it is necessary to align a mathematical model with the organization in order to achieve the desired results. The structure of a model's input must fit with the structure of data collection in the firm, and the output must be consistent with the decision structure. Otherwise, data collection will not be properly taken care of and the results of a model will not find their way to where decisions are made. Five years passed from the cooperation first started with the university until the model came on-line.Design/methodology/approach – Parts 1 and 2 of this series of papers discussed the stochastic programming model itself and the relationship between the model and the organization. The results are now reported.Findings – Reports on both organizational and financial results.Practical implications – Shows that, although a lot of work is needed to implement a complicated stochastic programming model within an organization, it can be done and can lead to good results. However, it takes time to adjust an organization to a new way of thinking, as a model like this can never work unless supported by upper management as well as those who use the model daily.Originality/value – The main value is to demonstrate in rather large detail how a somewhat complicated model can be developed and used in an organization, which, originally, was not well aligned with the ideas of the modellers.

AB - Purpose – Discusses why it is necessary to align a mathematical model with the organization in order to achieve the desired results. The structure of a model's input must fit with the structure of data collection in the firm, and the output must be consistent with the decision structure. Otherwise, data collection will not be properly taken care of and the results of a model will not find their way to where decisions are made. Five years passed from the cooperation first started with the university until the model came on-line.Design/methodology/approach – Parts 1 and 2 of this series of papers discussed the stochastic programming model itself and the relationship between the model and the organization. The results are now reported.Findings – Reports on both organizational and financial results.Practical implications – Shows that, although a lot of work is needed to implement a complicated stochastic programming model within an organization, it can be done and can lead to good results. However, it takes time to adjust an organization to a new way of thinking, as a model like this can never work unless supported by upper management as well as those who use the model daily.Originality/value – The main value is to demonstrate in rather large detail how a somewhat complicated model can be developed and used in an organization, which, originally, was not well aligned with the ideas of the modellers.

KW - Decision making

KW - Modelling

KW - Risk management

U2 - 10.1108/15265940510574763

DO - 10.1108/15265940510574763

M3 - Journal article

VL - 6

SP - 40

EP - 46

JO - The Journal of Risk Finance

JF - The Journal of Risk Finance

SN - 1526-5943

IS - 1

ER -