Stochastic Programming Model for Production Planning with Stochastic Aggregate Demand and Spreadsheet-based Solution Heuristics

Abstract

By discretising the stochastic demand, a deterministic nonlinear programming formulation is developed. Then, a hybrid simulation-optimisation heuristic that capitalises on the nature of the problem is designed. The outcome is an evaluation problem that is efficiently solved using a spreadsheet model. The main contribution of the paper is providing production managers with a tractable formulation of the production planning problem in a stochastic environment and an efficient solution scheme. A key benefit of this approach is that it provides quick near-optimal so lutions without requiring in-depth knowledge or significant investments in optimisation techniques and software. (original abstract)