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Random Yield and Random Demand in a Production System with Downward Substitution

Author

Listed:
  • Arthur Hsu

    (Carnegie Mellon University, Pittsburgh, Pennsylvania)

  • Yehuda Bassok

    (University of Washington, Seattle, Washington)

Abstract

In this paper, we present and solve a single-period, multiproduct, downward substitution model. Our model has one raw material as the production input and produces N different products as outputs. The demands and yields for the products are random. We determine the optimal production input and allocation of the N products to satisfy demands. The problem is modeled as a two-stage stochastic program, which we show can be decomposed into a parameterized network flow problem. We present and compare three different solution methods: a stochastic linear program, a decomposition resulting in a series of network flow subproblems, and a decomposition where the same network flow subproblems are solved by a new greedy algorithm.

Suggested Citation

  • Arthur Hsu & Yehuda Bassok, 1999. "Random Yield and Random Demand in a Production System with Downward Substitution," Operations Research, INFORMS, vol. 47(2), pages 277-290, April.
    • Handle: RePEc:inm:oropre:v:47:y:1999:i:2:p:277-290
    DOI: 10.1287/opre.47.2.277
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    References listed on IDEAS

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