A SUBOPTIMAL POLICY FOR STOCHASTIC PRODUCTION PLANNING PROBLEM

This paper deals with the stochastic optimal production planning where inventory and production variables are subject to probabilistic constraint. The objective is to minimize the expected holding and production costs that are assumed quadratic as in Holt, Modigliani, Muth and Simon (HMMS) [1] model. A sub-optimal strategy based on a linear feedback rule is proposed. It doesn't only provide a decision policy for the problem but it is also responsible for accommodating the uncertainties due to fluctuating demand for products. A simple example illustrates the application of this strategy.