Models for robust tactical planning in multi-stage production systems with uncertain demands

We consider the problem of designing robust tactical production plans, in a multi-stage production system, when the periodic demands of the finished products are uncertain. First, we discuss the concept of robustness in tactical production planning and how we intend to approach it. We then present and discuss three models to generate robust tactical plans when the finished-product demands are stochastic with known distributions. In particular, we discuss plans produced, respectively, by a two-stage stochastic planning model, by a robust stochastic optimization planning model, and by an equivalent deterministic planning model which integrates the variability of the finished-product demands. The third model uses finished-product average demands as minimal requirements to satisfy, and seeks to offset the effect of demand variability through the use of planned capacity cushion levels at each stage of the production system. An experimental study is carried out to compare the performances of the plans produced by the three models to determine how each one achieves robustness. The main result is that the proposed robust deterministic model produces plans that achieve better trade-offs between minimum average cost and minimum cost variability. Moreover, the required computational time and space are by far less important in the proposed robust deterministic model compared to the two others. (C) 2009 Elsevier Ltd. All rights reserved.