Sequential optimization and revision of production plans over time

Abstract Production plans generated by linear programming technique over the planning horizon are not responsive to the actual fluctuations of stochastic demand at each time period. The deterioation in the total-cost performance is due to absence of predicting-error feedback for sequential revision of the production targets. In this paper, a simple sequential optimization procedure using minimum mean-square-error recursive forecast is introduced. The total cost performance of this proposed technique is compared with the chance-constrained linear programming method for sequential production plan generation.