Multiproduct Production Scheduling for Style Goods with Limited Capacity, Forecast Revisions and Terminal Delivery

Warren H. Hausman and Rein Peterson
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Warren H. Hausman: Alfred.P. Sloan School of Management, Massachusetts Institute of Technology
Rein Peterson: York University

Management Science, 1972, vol. 18, issue 7, 370-383

Abstract: A general mathematical model is formulated for the problem of scheduling production quantities for a group of products with seasonal stochastic demand through a common production facility. It is assumed that revised forecasts of total demand over the season for each product become available as the season progresses; delivery is not required until the end of the selling season. Limited production capacity requires that some production take place early in the season, when forecasts are less accurate. At the end of the season, there are overage costs and underage costs representing costs of producing excess quantities and opportunity costs of not producing enough units. Under certain assumptions concerning the data-generating process for forecast revisions, it is possible to formulate the entire problem as a dynamic programming problem; however, the formulation is not computationally feasible if two or more products are considered. Three heuristic approaches to the multi-product problem are presented, and their cost performance is evaluated in some numerical examples. In these particular examples, more frequent reforecasting and rescheduling produces substantial reduction in costs.

Date: 1972
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