A PERIODIC REVIEW, PRODUCTION PLANNING-MODEL WITH UNCERTAIN CAPACITY AND UNCERTAIN DEMAND - OPTIMALITY OF EXTENDED MYOPIC POLICIES

Increasing product complexity, manufacturing environment complexity an d an increased emphasis on product quality are all factors leading to uncertainties in production processes. These uncertainties are in the form of unplanned machine maintenance, varying production yields and r ework, among others. In planning for production, an adequate model mus t incorporate these uncertainties into the representation of the produ ction process. This paper treats the aggregate planning problem for a single product with random demand and random capacity. In the single-p eriod problem, random capacity does not affect the optimal policy but results in a unimodal, nonconvex cost function. In the multiple-period and infinite-horizon settings order-up-to policies that are dependent on the distribution of capacity are shown to be optimal in spite of a nonconvex cost. In the infinite-horizon setting an intuitive descript ion of the situation leads to the notion of a class of extended myopic policies, requiring the consideration of review periods of uncertain length.