Optimisation of Stochastic Multi-item Manufacturing for Shareholder Wealth Maximisation

Abstract

Lot-sizing is pivotal to manufacturing, especially in stochastic multi-item batch production. Although its criticality has been generally acknowledged in operation management, most optimisation approaches advanced in recent years are often rendered impractical and sometimes misleading. This is because little attention has been paid to the real corporate capital structure and the overall business goal of maximising the shareholder wealth. In this paper, we attempt to optimise stochastic multi-item lot-sizing for make-to-order manufacturing in a complex yet realistic capital structure, with an aim to realize the overall business objective of maximising the shareholder wealth. Our study takes account of a series of interconnected economical parameters pertinent to maximisation of the shareholder wealth, and also examines the impacts of corporate capital structures on shareholder wealth advancement. Computational studies are presented to numerically and analytically demonstrate the important implications of our proposed manufacturing model on gaining corporate wealth in a practical capital structure.