MULTISTAGE PRODUCTION FOR STOCHASTIC SEASONAL DEMAND

The problem is to determine production quantities of the various components and assemblies at each period to minimize expected costs of underage and overage. If delivery is not required until the end of the selling (or ″order-taking″ ) season, then a dynamic programming formulation can produce the optimal decision rule. However, for the case in which delivery is required during the season, the associated dynamic programming formulation is computationally infeasible. The paper explores four heuristic for the latter problem and compares their cost performance in a numerical example. The most sophisticated heuristic produces expected profits which range from 3. 2% to 5. 5% of an upper bound on expected profit.