Supply Chains, Investment Portfolios, and Roster Management Joel Sokol, PhD

Key Questions How valuable will each player be?  Variability/forecast error  Short and long term Roster composition – who’s on the team?  Now and future Player development – who’s on their way?  Coordination through entire system OPERATIONS RESEARCH

What is operations research? Mathematical modeling and solution/analysis techniques for:  Understanding complex systems  Accounting for stochastic/random outcomes  Optimizing system performance …or performance of a particular system participant

Investment portfolio optimization Maximize $ return Diversification  By economic sector, size  By risk profile  By value in various economic conditions Budget restrictions Determine the right risk level for each investor OR used by every major investment firm, hedge fund, mutual fund, etc. – $Billions

The roster as a portfolio of players Maximize $ return Diversification  By economic sector, size  By risk profile  By value in various economic conditions Budget restrictions Determine the right risk level for each investor Maximize team success Diversification  By position and skill set  By risk profile  By value in reg. season and in playoffs Budget restrictions Determine the right risk level for each team

Supply chain coordination  Acquisition of raw materials  Progression through refining, manufacturing, packaging, etc.  Periodic quality checks (rework or discards)  Can purchase spare assets from competitors  Key: Goods/services ready right when needed OR used by almost all major manufacturers/ service providers (Ex: GM saves $2B)

Player development as a supply chain  Acquisition of raw materials  Progression through refining, manufacturing, packaging, etc.  Periodic quality checks (rework or discards)  Can purchase spare assets from competitors  Key: Goods/services ready right when needed  Draft/acquire “raw” players  Progression through stages of minor league system  Periodic quality checks (repeat league or release)  Can acquire assets (trade, free agency) from competitors  Key: New players ready right when needed

Successful mathematical models/methods Selecting maximum-value portfolios Accounting for risk and variability Coordination across multi-stage systems Planning today for future needs/circumstances Important differences (research required)  Variability in raw talent  More competition for scarce assets  Higher value of winning Can operations research help?

What will a combined model do? Is a trade/free agent signing worthwhile given a team’s risk profile and season/playoff needs? Which players will likely be “surplus”?  Get value for them now Where/when will shortages likely occur?  Remedy before need becomes acute How could drafts/trades/signings/contracts/promotion be structured to minimize or avoid exposure to shortage? Etc.

Where we are so far? (GT-centric) Current research progress Combined portfolio/supply chain framework model for roster management Investigation of value profiles Identified some categories of players who lose more value in playoff situations than others do Biggest needs  Full data (esp. defense), interactions, projections  Team specifications (horizon, need to win, get to playoff vs. win playoffs, mgr. preferences, etc.)

Opportunity for collaboration Benefits for operations research partners  Development of new mathematical models and methodology  Enjoyable work for baseball fans! Benefits for MLB partners  Early-adopter competitive advantage  Customized planning models

Supply Chains, Investment Portfolios, and Roster Management Joel Sokol, PhD

Operations research at Georgia Tech Industrial and Systems Engineering (#1-ranked)  Supply Chain Logistics Institute (SCL)  Quantitative and Computational Finance (QCF)  Algorithms, Combinatorics, & Optimization (ACO)  Engineering Statistics (STAT)  Stochastics, Simulation, Human-Computer Interaction, etc. Previous GT/OR sports-related successes  Schedules for MLB in 2005 & 2007 (SCL & ACO)  Ranking system for NCAA basketball tournament selection and seeding (SCL, ACO, QCF, STAT)