MULTIPERIOD PRODUCTION PLANNING WITH DEMAND AND COST FLUCTUATION

We consider the production planning of a single product over a finite planning horizon. The latter is made up of time periods that may not n ecessarily be of the same length. In each time period, the product is subject to a constant demand and a finite production capacity. If dema nd is not satisfied immediately, it is backlogged. The cost rates of c arrying inventory or backlogging a unit of the product may also vary f rom One time period to the next. The objective is to determine an opti mal production plan for the product so as to minimize the total invent ory and backlog costs incurred over the planning horizon. The problem is formulated as an optimal control problem. First, the optimal soluti on of the one-time-period problem is determined. Then, based on the on e-time-period optimal solution, the optimal solution for the whole pla nning horizon is obtained by solving a nonlinear programming problem. (C) 1998 Elsevier Science Ltd. Ail rights reserved.