Deterministic Approximations to Co-Production Problems with Service Constraints and Random Yields

Abstract

We study production planning problems where multiple item categories are produced simultaneously. The items have random yields and are used to satisfy the demands of many products. These products have specification requirements that overlap. An item originally targeted to satisfy the demand of one product may be used to satisfy the demand of other products when it conforms to their specifications. Customers' demand must be satisfied from inventory 100α% of the time. We formulate the problem with service constraints and provide near-optimal solution to the problem with fixed planning horizon. We also propose simple heuristics for the problem solved with a rolling horizon. Some of the heuristics performed very well over a wide range of parameters.