Production control of a supply chain node with uncertain capacity and demand

The Supply Chain is a worldwide network of suppliers, factories, warehouses, distribution centers, and retailers through which raw materials are acquired, transformed, and delivered to customers. Due to the dynamic fluctuation of customer demands and raw material availability in the global market, manufacturing enterprises are facing difficulties in rapidly responding to market changes. To face this complexity, it is useful to approach the global scenario through a local optimization problem where the interaction with the external variables and other agents is modeled as a stochastic environment. So a simplified discrete time continuous state Markov model of the uncertain scenario characterizing the operation of a retailer node is developed in this paper and an algorithm to control it is presented and compared with other policies known in literature. Numerical examples illustrate the operation of the proposed algorithm.