Abstract
We study the practical production planning problem of a food producer facing a
non-stationary erratic demand for a perishable product with a fixed life time. In meeting the
uncertain demand, the food producer uses a FIFO issuing policy. The food producer aims at
meeting a certain service level at lowest cost. Every production run a set-up cost is incurred.
Moreover, the producer has to deal with unit production cost, unit holding cost and unit cost
of waste. The production plan for a finite time horizon specifies in which periods to produce
and how much.
We formulate this single item – single echelon production planning problem as a stochastic
programming model with a chance constraint. We show that an approximate solution can be
provided by a MILP model. The generated plan simultaneously specifies the periods to
produce and the corresponding order-up-to levels. The order-up-to level for each period is
corrected for the expected waste by explicitly considering for every period the expected agedistribution
of the products in stock. The model assumes zero lead time and backlogging of
shortages. The viability of the approach is illustrated by numerical experiments. Simulation
shows that in 95.8% of the periods the service level requirements are met with an error
tolerance of 1%.
Original language | English |
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Place of Publication | Wageningen |
Publisher | optimization-online.org |
Publication status | Published - 2013 |