A decomposition algorithm for multi‐item production planning with independent random demand

Abstract

AbstractProduction planning in a multiproduct setting where the demands for different items are independent random variables that are also featured with a dynamic behavior over the planning horizon is a challenging task. With a particular focus on maintenance facilities, this study proposes a multistage stochastic programming (MSP) model for operations planning under independent random demand of faulty components in the modular‐structured devices (e.g., gas turbines) received for repair and overhaul services. A Lagrangian relaxation‐based decomposition heuristic is also developed to efficiently solve the problem for real‐size instances. This heuristic relies on decomposing the MSP model into submodels corresponding to component STs and coordinating them via a subgradient algorithm to obtain a high‐quality feasible solution. Our numerical experiments conducted on a range of problem instances endorse the significant value of incorporating demand uncertainty and the effectiveness of the proposed solution methodology in overcoming computational complexity.