A STOCHASTIC LINEAR-PROGRAMMING APPROACH TO HIERARCHICAL PRODUCTION PLANNING

This paper examines production planning decisions. The process is form ulated as a hierarchical production planning (HPP) model under uncerta in demand. A review of HPP articles indicates that while current model s do consider uncertainty as a part of their solution methods, a defic iency persists since these models fail to incorporate the uncertain de mand explicitly in the formulation of the problem. A stochastic linear programming model (SLP) is proposed to better reflect reality and to provide a superior solution. The model remains computationally tractab le despite the precise incorporation of uncertainty and the imposition of penalties when constraints are violated. A problem is introduced w hich illustrates the superiority of the proposed model over those curr ently being applied.