Recent advances in the area of simulation optimization allow managers to go beyond traditional methodologies in selecting optimal sets of projects to fund. These advances make use of portfolio performance measures and goals that can be defined to directly relate to corporate strategy and are easy to understand and communicate. This paper presents a real-world example to illustrate this state-of-the-art methodology.
In this paper, we first describe traditional techniques for portfolio planning and project selection. We then detail simulation optimization and its use as an ideal tool for optimizing project portfolios. We conclude with a real-world example involving the energy industry and illustrate the challenges and options facing corporate managers today via several approaches/cases.
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