Producing multiple products with stochastic seasonal demand and capacity limits

Abstract

Capacity limitations for manufacturers of seasonally demanded goods create difficult problems for both practitioners and researchers. Empirical data suggest that practitioner response is far from optimal. Optimal solutions, however, are precluded for realistic problems due to computational complexity. Here, the structure of optimal policies is explored and heuristics based on myopic policies are developed. For simple problems, the best heuristic deviates from optimality by an average of 2.5% over a variety of conditions. Heuristics are also compared under more realistic business conditions by simulation.