A Robust Optimization Approach to Production Planning

In this paper we propose a robust optimization approach to single-item, multi-period, production planning in a rolling horizon setting when there is uncertainty in demand and production capacity. Mula et al. (2006) gives a comprehensive overview of production planning under uncertainty. However, any approach based on the work of Ben-Tal et al. (2009) is not to be found. Nevertheless, production problems are typically formulated as linear optimization problems and henceforth, a robust optimization approach lends its self very well. Furthermore, contemporary ERP systems that employ production planning do so in a rolling horizon setting. A simulation study is conducted to make a comparison between the nominal linear optimization problem, its robust counterpart in case of various uncertainty sets, its adjustable robust counterpart and the best case were there is full knowledge on the demand.