Integrated capacity, demand, and production planning with subcontracting and overtime options

Yasemin Merzifonluoglu, Joseph Geunes*, H. E. Romeijn

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

21 Citations (Scopus)

Abstract

Models for integrated production and demand planning decisions can serve to improve a producer's ability to effectively match demand requirements with production capabilities. In contexts with price-sensitive demands, economies of scale in production, and multiple capacity options, such integrated planning problems can quickly become complex. To address these complexities, this paper provides profit-maximizing production planning models for determining optimal demand and internal production capacity levels under price-sensitive deterministic demands, with subcontracting and overtime options. The models determine a producer's optimal price, production, inventory, subcontracting, overtime, and internal capacity levels, while accounting for production economies of scale and capacity costs through concave cost functions. We use polyhedral properties and dynamic programming techniques to provide polynomial-time solution approaches for obtaining an optimal solution for this class of problems when the internal capacity level is time-invariant. (C) 2007 Wiley Periodicals, Inc.

Original languageEnglish
Pages (from-to)433-447
JournalNaval Research Logistics
Volume54
Issue number4
DOIs
Publication statusPublished - Jun 2007
Externally publishedYes

Keywords

  • production planning
  • inventory control
  • pricing
  • dynamic programming
  • mixed integer programming
  • LOT-SIZING PROBLEM
  • MANUFACTURING SYSTEMS
  • LEADTIME FLEXIBILITY
  • ORDER SELECTION
  • CONCAVE COSTS
  • DECISIONS
  • MODEL
  • INVENTORY
  • EXPANSION
  • COORDINATION

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