Simulation of Decentralized Planning in Two Danish Organizations Using Linear Programming Decomposition

Abstract

This paper describes the results of two studies where decentralized planning has been simulated. The coordination mechanisms employed were based on the Dantzig-Wolfe decomposition algorithm, and the Ten Kate decomposition algorithm, which are price directive and budget directive planning procedures, respectively. The importance of the results is that the data and the structure of the two planning problems come from real organizations—a cooperative slaughterhouse and a forecast model for Danish agriculture. Thus conclusions based on using a price-directive and a budget-directive planning method to simulate decentralized planning in these organizations have relevance to the potential value of using such methods in real organizations. The main conclusions concern the importance of and the difficulties in finding good starting strategies for the two methods and the impact of the organizational structure on the rate of improvement for the methods.