Random Yield and Random Demand in a Production System with Downward Substitution

Arthur Hsu and Yehuda Bassok
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Arthur Hsu: Carnegie Mellon University, Pittsburgh, Pennsylvania
Yehuda Bassok: University of Washington, Seattle, Washington

Operations Research, 1999, vol. 47, issue 2, 277-290

Abstract: In this paper, we present and solve a single-period, multiproduct, downward substitution model. Our model has one raw material as the production input and produces N different products as outputs. The demands and yields for the products are random. We determine the optimal production input and allocation of the N products to satisfy demands. The problem is modeled as a two-stage stochastic program, which we show can be decomposed into a parameterized network flow problem. We present and compare three different solution methods: a stochastic linear program, a decomposition resulting in a series of network flow subproblems, and a decomposition where the same network flow subproblems are solved by a new greedy algorithm.

Keywords: inventory: uncertainty; random yield; inventory: multi-item; substitution; programming; stochastic; algorithms; greedy (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (76)

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