Production Planning for a Stochastic Demand Process

Nicholas J. Gonedes and Zvi Lieber
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Nicholas J. Gonedes: University of Chicago, Chicago, Illinois
Zvi Lieber: Tel Aviv University, Tel Aviv, Israel

Operations Research, 1974, vol. 22, issue 4, 771-787

Abstract: This paper deals with planning production of a single good over a prescribed finite interval of time [0, T ]. The costs considered within the problem are production and holding costs; holding costs are incurred for negative inventory (caused by backlogged sales) and positive inventory (caused by production in excess of demand). The demand for the product is treated as a stochastic process. Problem formulation and optimization use tools from continuous-time stochastic variational calculus and control theory. Among its results, the paper proves the uniqueness of the optimal solution and provides an algorithm for the problem.

Date: 1974
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Persistent link: https://EconPapers.repec.org/RePEc:inm:oropre:v:22:y:1974:i:4:p:771-787

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