Decision Optimization

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Production optimization with unknown demand and storage possibility

  • 1.  Production optimization with unknown demand and storage possibility

    Posted Mon May 02, 2022 12:06 PM

    For a project we are to determine the quantity of production of different products i, denoted by xi. To do this, we know in advance the production prices per unit pi, the sales price vi, the fixed costs F that are deducted before production and we know that the demand for product i is normally distributed with parameters mu i and sigma i.

    After each period, we have the option of either scrapping the leftover products at the price vpi, or renting a number j of warehouses with size G for rent M. The products i take different sizes wi.

    The goal is to maximize the yield.

    Does anyone have any idea what keyword I can search for?

    Had the idea to formulate the storage problem as a Knapsack problem, where I then have the variable whether to store the product or not, of course for each product separately. But don't know how to formulate it exactly and haven't found anything yet on how to deal with the possibility of stock extension. In addition, one cannot determine so simply the value of a product, since with increasing number of products of the product i the use decreases. In addition, it is not clear to me how I can maximize the expected value of the yield, because for this I must minimize the number of warehouses, and for this I need the number of unsold products.

    Thanks in advance :)



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    Alexander Krause
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