Turning Lemons into Lemonade
How Optimization Tools Help You Turn Questionable
Data into Profitable Actions
Oliver Bastert
Senior Director
FICO
© 2014 Fair Isaac Corporation. Confidential.
This presentation is provided for the recipient only and cannot be reproduced or shared without Fair Isaac Corporation’s express consent.
There are no excuses anymore:
Optimize your decisions even if the
data is uncertain or unknown!
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© 2014 Fair Isaac Corporation. Confidential.
Optimization
► Optimization
allows you to take best business
decisions, based on
► Your
business constraints
► Your data
► Your KPIs
► Optimization
► Competing
►
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resources
Maximize production with a restricted
amount of labor
► Data
►
objectives
Maximize profits and minimize (or constraint) costs
► Scarce
►
can deal with
uncertainty
Data might be uncertain, erroneous
or unknown
© 2014 Fair Isaac Corporation. Confidential.
Portfolio Optimization
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© 2014 Fair Isaac Corporation. Confidential.
Call Center Optimization
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© 2014 Fair Isaac Corporation. Confidential.
Cancer Therapy
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© 2014 Fair Isaac Corporation. Confidential.
Traffic Routing
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© 2014 Fair Isaac Corporation. Confidential.
Optimization with limited knowledge
Hands on Robust Optimization
► Each
link has two travel times associated with it
► The
first number denotes the time without disruption and the second number adds a
slowdown on the link
(6,3)
A
B
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© 2014 Fair Isaac Corporation. Confidential.
Optimization with limited knowledge
Hands on Robust Optimization
► There
are two accidents (somewhere) in the network, how do you plan best?
(6,3)
3+3+3 = 9
(3+4)+(3+7)+3 = 20
3+3+3+3 = 12
(3+2)+3+(3+1)+3 = 15
A
B
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© 2014 Fair Isaac Corporation. Confidential.
Data Challenges, So What?
Since data is missing or available at arguable
quality only, you don’t make decisions?
We have to, hence:
► How
to make very good and feasible decisions under data uncertainty
► How
to decide if some data is completely unknown?
► How
can we avoid an incorrectly “over-optimized” (over-fitted) solution?
► Is
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there a more rigorous method than (Monte-Carlo) simulation?
© 2014 Fair Isaac Corporation. Confidential.
Robust Optimization is like Playing a Game
► We
usually have good knowledge about the uncertainty, like
► Bounds
or estimates on (standard) deviation
► We
have the power to take decisions / implement a strategy
► But
the uncertainty is not under our control; it is controlled by our opponent
► Nature
► Competitor
/ Supplier / Customer
► Market
Robustness means that we are prepared for (protected against) any realization of
the uncertainty (within the given uncertainty model)
© 2014 Fair Isaac Corporation. Confidential.
What Robust Optimization Gives You
► Evaluate
► What
your risks
if my predicted inputs would be 10% off?
► Compute
the best decision under a pessimistic view of the future
► Compute
a very good decision under a likely view of the future
► An
always feasible solution
► Measure
► How
costs of robustness (protection)
much does a robust solution cost me compared to the best/average case scenario
► Measure
benefit of robustness
► Compare
the robust solution to a worst case scenario
► (Monte-Carlo)
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simulations are expensive, robust optimization is not
© 2014 Fair Isaac Corporation. Confidential.
Predicting Data with High Uncertainty
► The
predicted orange point is not the truth!
► Robust
optimization can optimize decisions
over a range of possibilities
► As
opposed to simulation, robust optimization
can simulate over a set of posbilities
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© 2014 Fair Isaac Corporation. Confidential.
Modelling the Uncertainty
Scenario Based
► Assume
a number of historical
observations or future predictions for
input data is given
► The
robust solution is the best solution
which is feasible for all scenarios
► Simulation
gives you a solution for each
scenario but not a solution for all
scenarios
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© 2014 Fair Isaac Corporation. Confidential.
Modelling the Uncertainty
Ellipsoid Definition and Confidence
► Maximum
distance or deviation
► By
increasing or decreasing the diameter
we can model confidence
► The
robust solution is the best solution
which is feasible for all points in the
ellipsoid
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© 2014 Fair Isaac Corporation. Confidential.
Demo
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© 2014 Fair Isaac Corporation. Confidential.
Robust Optimization
► Evaluate
the cost of robustness
► Understand
trade-offs and sensitivities
► Adapt
data and parameters to create and
compare scenarios
► Visualize
data and results for analysis
► Collaborate
► Customize
► Combine
in a multi-user environment
to your needs
with predictive analytics and business
rules
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© 2014 Fair Isaac Corporation. Confidential.
Results
► 70%
reduction in time to create interactive and
collaborative optimization solutions
► Prebuilt
solution templates raise business
value and reduce time to market
► Delivers
optimized decisions quickly; in certain
areas more than 5x faster than the
competition
► Provides
robust decisions even when data is
incomplete or inaccurate
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© 2014 Fair Isaac Corporation. Confidential.
FICO® Optimization Modeler is part of FICO® Decision
Management Studio
FICO® Analytic Marketplace
Buy
FICO® Application Studio
FICO
Decision
Management
Studio
Analytic
Modeler
Decision
Modeler
Optimization
Modeler
Build
FICO® Decision Management Platform
FICO® Visual Insights Studio
Manage
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© 2014 Fair Isaac Corporation. Confidential.
Back to the Goose
► A well
performing portfolio with controlled risk
► A call
centre which uses few resources and delivers high quality of service under
varying demand
► Reliable
► Fewer
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on time delivery under varying traffic conditions
CT scans and more accurate radiation (angles and intensity)
© 2014 Fair Isaac Corporation. Confidential.
Air Products and Chemicals
Sources: http://inweekly.net/, www.pmgroup-global.com, www.always70wade.com
http://melanomainternational.org/2013/08/best-hospitals-some-tips-to-find-one/#.VF0RPvnF_ik
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© 2014 Fair Isaac Corporation. Confidential.
Air Products and Chemicals
A Case Study
Production planning at a liquid oxygen/nitrogen plant, a very energy-intensive
operation and critical to health of people (hospital demand has to be met)
► Power
company offers an interruptible load contract
► Power
company can suspend supply in periods of high demand (summer)
► A number of interruptions each month (8 hours each)
► Cost per kWh is lower than with uninterrupted contract
Outcome
► Treat
interruptions as uncertain variables
► Plan
production so that even with the most evil-placed interruptions customer
demand is satisfied
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© 2014 Fair Isaac Corporation. Confidential.
How Can Robust Optimization Help Me?
► Are
you taking data driven decisions today?
► How
certain are you about the correctness/quality of
your data?
► Do
you want to know the impact in case your data
would not be perfect?
► Do
you want to know how a safer/better strategy
would look like?
► Do
you want to know which data impacts your
decisions the most?
► Do
you want to know for which data you need to
improve quality for improving your KPIs?
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© 2014 Fair Isaac Corporation. Confidential.
Challenge Us!
► Talk
to us at the booth to get more information and see a demo
► Talk
to us during a 1-1 session and a high value decision to us with known
data issues
► Let’s
► We
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arrange a workshop with your company
will show you a path to improve your decision with unbelievable ROIs
© 2014 Fair Isaac Corporation. Confidential.
If you are not optimizing your
decisions today, learn how much you
are leaving on the table.
Poor data quality is no excuse; it is an
imperative to optimize.
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© 2014 Fair Isaac Corporation. Confidential.
Thank You!
Oliver Bastert
oliverbastert@fico.com
© 2014 Fair Isaac Corporation. Confidential.
This presentation is provided for the recipient only and cannot be reproduced or shared without Fair Isaac Corporation’s express consent.
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© 2014 Fair Isaac Corporation. Confidential.
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Oliver Bastert
oliverbastert@fico.com
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© 2014 Fair Isaac Corporation. Confidential.