Flexible versus robust lot-scheduling subject to random production yield and deterministic dynamic demand

We consider the problem of scheduling production lots for multiple products competing for a common production resource that processes the product units serially. The demand for each product and period is assumed to be known with certainty, but the yield per production lot is random as the production process can reach an out-of-control state while processing each single product unit of a lot. A service-level constraint is used to limit the backlog in the presence of this yield uncertainty. We address the question of how to determine static production lots and how to schedule these lots over the discrete periods of a finite planning horizon. The scheduling problem is characterized by a trade-off between the cost of holding inventory and the cost of overtime, whereas the production output is uncertain. For this purpose, we develop a rigid and robust planning approach and two flexible heuristic scheduling approaches. In an extensive numerical study, we compare the different approaches to assess the cost of operating according to a robust plan as opposed to a flexible policy.