The strategic value of flexibility in sequential decision making

This paper formalizes the notion of flexibility in sequential decision making and investigates conditions under which the use of flexibility as an additional criterion may be justified. The correlations between flexibility and value, and flexibility and risk, are studied under various assumptions of uncertainty and information. A number of approaches to constructing a multiple objective decision criterion are discussed. In particular, characteristics of a dual-objective value function, that accounts for both expected value and flexibility, are described. The usefulness of these results is illustrated by applying them to decision processes in discrete part manufacturing. Relationships between flexibility and manufacturing performance are shown and implications to part flow control are discussed.