Stochastic Production Planning for Maximisation of Shareholder Wealth in the MTS Supply Chain Mode

Abstract

The capacitated lot sizing policy is pivotaltostochastic production planning. This paper attempts to formulate a general lot sizing model for a stochastic MTS (make-to-stock) manufacturing environment under demand uncertainty. To better reflect real-world manufacturing, general distributions are used as a substitute for unrealistic theoretical assumptions on involved random variables. Instead of the traditional optimisation objectives, this research aims at maximisation of the full interest of investors, that is, the shareholder wealth. A quantitative comparison between these optimisation objectives is carried out to offer guidance on the decisions on these performance measures. Numerical experiments validate the significance of the shareholder wealth to production planning. It not only reveals the relevance of the proposed model to production planning, but also highlights the similarities and differences in applications among these commonly used performance metrics.