Application of optimal control throry to production-inventory system

Abstract

In aggregate production planning and scheduling, the fluctuation in demand is absorbed mainly through adjustments of production rate, work force, and inventory level. A number of approaches and models have been developed to solve this problem in which the Linear Decision Rule is best known. The paper employs the optimal control theory to decide the size of production rate and work force with the same quadratic cost function as the L.D.R. assumes for production-inventory system. The developed procedure is illustrated with several types of demand pattern such as impulse, step, ramp, and random. Compared with the L.D.R., this approach is rather complicated in computation. However, it is convenient to apply to those cases where production leadtime exists and the short term production planning is required.