Production‐allocation scheduling and capacity expansion using network flows under uncertainty

Abstract

AbstractThis paper extends Connors and Zangwill's work in network flows under uncertainty to the convex costs case. In this paper the extended network flow under uncertainty algorithm is applied to compute N‐period production and delivery schedules of a single commodity in a two‐echelon production‐inventory system with convex costs and low demand items. Given an initial production capacity for N periods, the optimal production and delivery schedules for the entire N periods are characterized by the flows through paths of minimal expected discounted cost in the networkAs a by‐product of this algorithm the multi‐period stochastic version of the parametric budget problem for the two‐echelon production‐inventory system is solved.