Reconficurable capacity allocation under uncertainty of product demand

In today's global economics, customer-driven world markets experience high demand fluctuations, turbulence of which is often amplified by arrival of new products and new technologies. In case of a company offering mass customized products (e.g., product belonging to the same part family but with a variety of differences) the strategic issue becomes how to manage the production capacity given volatility of the demand for each of the offered product versions. The paper explores use of financial portfolio optimization approach to address the issue of revenue-maximizing capacity allocation when a family of products (product portfolio) is manufactured in the same plant.