A PRODUCTION ORDER QUANTITY MODEL WITH STOCHASTIC DEMAND FOR A CHOCOLATE MILK MANUFACTURER

A production planning model with stochastic demand, constant defective rate and capacity constraint is developed to analyse the production p roblem of a chocolate milk manufacturer. The model is proven to posses s an optimal solution under the given conditions. An optimal productio n plan is established for the firm, which is shown to be superior to t he present production plan. The sensitivity analysis performed on the optimal solution provides useful insights on the inventory control and capacity requirement decisions of the firm.