Production planning with discounting and stochastic demands

Production planning with discounting and stochastic demands

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Article ID: iaor1993452
Country: Netherlands
Volume: 50
Issue: 3
Start Page Number: 257
End Page Number: 265
Publication Date: Feb 1991
Journal: European Journal of Operational Research
Authors:
Abstract:

A general continuous review production planning problem with stochastic demand is considered. Conditions under which the stochastic problem may be correctly solved using an equivalent deterministic problem are developed. This deterministic problem is known to have the same solution as the stochastic problem. Moreover, conditions are established under which the deterministic equivalent problem differs from a commonly used deterministic approximation to the problem only in the interest rate used in discounting. Thus, solving the stochastic problem is no more difficult than solving a commonly used approximation of the problem.

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