NOTE ON UTILIZING STOCHASTIC OPTIMAL-CONTROL IN AGGREGATE PRODUCTION PLANNING

This note summarizes research into the use of stochastic optimal control in solving aggregate production scheduling problems. The approach is compared to deterministic approaches to the problem, commonly proposed in the literature. Stochastic optimal control provides a rich methodology for exploring such situations. In particular, it is found that it can accommodate a wide variety of non-linear cost structures. Furthermore, it is an ideal planning tool when the operating environment contains a significant degree of uncertainty. Finally, within stochastic optimal control it is straightforward to directly incorporate demand forecasts into the structure and thereby measure the effects of demand uncertainty.