A stochastic programming model for production planning of perishable products with postponement

STEPHEN C. H. LEUNG* and WAN-LUNG NG

Department of Management Sciences, City University of Hong Kong, Hong Kong

MRPII 32

This study addresses the production planning problem for perishable products, in which the cost and shortage of products are minimised subject to a set of constraints such as warehouse space, labour working time and machine time.

Using the concept of postponement, the production process for perishable products is differentiated into two phases to better utilise the resources.

A two-stage stochastic programming with recourse model is developed to determine the production loading plan with uncertain demand and parameters. A set of data from a toy company shows the benefits of the postponement strategy: these include lower total cost and higher utilisation of resources.

The impact of unit shortage cost under different probability distribution of economic scenarios on the total cost is analyzed. Comparative analysis of solutions with and without postponement strategies is also performed.

Keywords: Production management; Stochastic programming; Perishable; Postponement