Product Mix Optimization Based on Monte Carlo Simulation: A Case Study

Abstract

Simulations are widely used in manufacturing system design, production planning and decision making. The aim of this paper is to present the possibility of using Monte Carlo simulations in the production plan optimizing and in the project risk management. Optimization is accomplished through two different approaches which principles and results are mutually compared. According to the first approach, production optimization is performed via a deterministic model using the Generalized Reduced Gradient algorithm. The second approach is based on the stochastic model. The optimized production plan is submitted to risk analysis. Two approaches are demonstrated in order to reduce the rate of risk. The first way is modifying the production plan to increase the forecast reliability; the second approach is limiting the uncertainty of key variables. The detailed methodology enables implementing presented approaches in solving various optimization tasks.