Solving multi-stage stochastic in-house production and outsourcing planning by two-level decomposition
by Lila Rasekh, Jacques Desrosiers
International Journal of Mathematics in Operational Research (IJMOR), Vol. 2, No. 2, 2010

Abstract: In-house production and outsourcing are important strategic decisions for planning production and capacity in business organisations. Outsourcing to overseas suppliers is often associated with risk with respect to the quality of the products. Hence, we developed a multi-stage stochastic programming model that takes into account the uncertainty involved in the production of the quality of outsourced products in the face of stochastic demand. The goal is to find an optimal way to choose between in-house capacity expansion and buying from local suppliers with assured quality versus buying from overseas suppliers. Moreover, we propose three alternative algorithms for solving the problem. These three approaches are: a two-level column generation by using the analytic centre cutting plane method (ACCPM), a two-level Benders' decomposition by using the ACCPM and a two-level decomposition where the first level is solved by using the classical Dantzig-Wolfe decomposition approach and the second level is solved by using the ACCPM.

Online publication date: Thu, 07-Jan-2010

The full text of this article is only available to individual subscribers or to users at subscribing institutions.

 
Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Mathematics in Operational Research (IJMOR):
Login with your Inderscience username and password:

Username:        Password:          Forgotten your password?

Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

If you still need assistance, please email subs@inderscience.com