Average Cost Optimality for an Unreliable Two-Machine Flowshop with Limited Internal Buffer
19 Pages Posted: 9 Apr 2008 Last revised: 26 Apr 2014
Date Written: 2000
We consider a production planning problem in a two-machine flowshop subject to breakdown and repair of machines and subject to nonnegativity and upper bound constraints on work-in-process. The objective is to choose machine production rates over time to minimize the long-run average inventory/backlog and production costs. For sufficiently large upper bound on the work-in-process, the problem is formulated as a stochastic dynamic program. We then establish a verification theorem and a partial characterization of the optimal control policy if it exists.
Keywords: production planning, stochastic dynamic programming, optimal control, long-run average cost
JEL Classification: M11, C61, M20
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