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Value of Image-based Yield Prediction: Multi-location Newsvendor Analysis

Conference paper
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Part of the Communications in Computer and Information Science book series (CCIS, volume 1162)

Abstract

Consider an agricultural processing company, which wants to pre-purchase crop from different locations before a harvesting season in order to maximize the total expected profit from all outputs subject to multiple resource constraints. The yields for different outputs are random and depend on the location. By remotely sensing from satellites or locally sensing from unmanned aerial vehicle, the firm may employ an image-based yield prediction model at the pre-purchase time. The distribution of the yield differs by a location. With the sensed data, the company updates the distribution of the yield using a regression model, whose explanatory variable is a vegetation index from image processing. At a more favorable location, the distribution of the yield is stochastically larger. The objective of this paper is to quantify the added value of image sensing in predicting crop yield. Specifically, the posterior yield distribution from image processing is used as an input to the multi-location newsvendor model with random yields. The optimal expected profit given the posterior distribution is compared to that with only the prior distribution of the yield. The difference between the total expected profits with the prior and posterior distributions is defined as the value of the sample information. We derive the type-1 and -2 errors as a function of the standard error of the estimate. In the numerical example, we show that the value of the sample information tends to be increasing (with diminishing return) as the yield prediction model becomes more accurate.

Keywords

Image processing Agricultural supply chain Applied operations research Stochastic model applications 

Notes

Acknowledgments

The problem was materialized after some discussions with Mr. Chatbodin Sritrakul, our part-time master student who owns a rice mill in the Northeast of Thailand. His independent project, a part of requirement for a master’s degree in logistics management at the school, was related to our model.

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Copyright information

© Springer Nature Switzerland AG 2020

Authors and Affiliations

  1. 1.Logistics Management Program, Graduate School of Applied StatisticsNational Institute of Development Administration (NIDA)BangkokThailand

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