Research
[1] How Should Seed Manufacturers Prepare for Climate Change? The Impact of Higher Yield Variability
Utku Serhatli, Andre Calmon, Enver Yucesan
>In revision for 2nd round of review at Production and Operations Management
This paper analyzes the optimal production and inventory assortment decisions of a seed manufacturer facing climate change as operationalized by increasing yield variability due to extreme weather conditions in addition to long supply lead times, and supply and demand uncertainty. Additionally, we investigate the value and the limits of operational flexibility in the form of postponement. To this end, we use a two-stage stochastic programming approach to characterize the optimal production and allocation decisions and the sample average approximation method in simulations to test the robustness of our findings to our modeling assumptions. Our simulation models are calibrated to reflect the operational set-up of our industrial partner. Our analysis shows that a minor increase in future yield variability leads to a large increase in the optimal seed production quantity. Consequently, this would not only significantly increase the seed manufacturer's working capital requirements, but its current supply capacity may not be sufficient to fulfill her optimal production plans, potentially threatening the global food supply. Second, we show that postponement increases average profits and enables a simple greedy allocation policy. However, not only does the value of postponement decreases with increasing yield variability, but low-margin seeds also become more susceptible to yield risk driven by climate change. Given the limitations of operational agility initiatives such as postponement under increased future yield variability triggered by climate change, agribusiness companies should be prepared to increase their production dramatically unless they accelerate the development of robust seeds with desirable characteristics even under extreme operating conditions.
[2] Improving Yield of Small Holder Farmers Using Certification Programs: Welfare Analysis
Utku Serhatli, Guillaume Roels
>Working paper, results available upon request
To help secure supply in agriculture-intensive economies, manufacturers often help smallholder farmers improve their yields through initiatives. Over the last decade, large buyers of essential commodities contributed to the development of sustainability certification programs that aim at helping farmers improve their yield. For instance, Ferrero Group introduced FFV (Ferrero Farming Values) for hazelnut farmers and Starbucks initiated C.A.F.E. (The Common Code for the Coffee Community) for coffee growers by. However, and perhaps paradoxically, some farmers feel that these programs can decrease commodity prices, which in turn can affect their profits negatively. We investigate the implications of such practices on the manufacturer’s and farmers’ profits, considering both total welfare and social inequality. We formulate this problem as a Stackelberg game where, in the first stage, the buyer chooses farmers to be included in the certification program and, in the second stage, farmers engage in a Cournot competition in the face of yield uncertainty. We investigate the implications of such practices on the buyer's and farmers’ profits, considering both total welfare and social inequality. Our first result suggests that including farmers in certification programs decreases commodity prices while making them less volatile. Therefore, even if farmers are not included in the certification programs, they can benefit from lower, but more stable, prices. Second, we find that prioritizing large farmers in certification programs not only maximizes buyer profits but also maximizes the total welfare of farmers that are not in the certification programs while minimizing the social inequality.
[3] Precision farming with Agriculture 4.0: The optimal UAV routing
Utku Serhatli, Andre Calmon, Enver Yucesan
>Research in Progress
[4] The Optimal Operations Strategy of Vertical Farms
Utku Serhatli, Andre Calmon, Enver Yucesan
>Research in Progress
[5] Carbon Cap and Carbon Tax Integration on Two-Echelon Capacitated Location Selection Problem
Utku Serhatli, Hande Yaman
>Research in Progress