Yasemin Merzifonluoğlu, Joseph Geunes, H. Edwin Romeijn
Integrated capacity, demand, and production planning with subcontracting and overtime options
This paper provides a new set of profit-maximizing production planning models for determining optimal demand and internal production capacity levels under price-sensitive deterministic demands with subcontracting and overtime options. The models determine a producer’s optimal price, production, inventory, subcontracting, overtime, and internal capacity levels, while accounting for production economies of scale and capacity costs through concave cost functions. We use polyhedral properties and dynamic programming techniques to provide polynomial-time solution approaches for obtaining an optimal solution for this class of problems when the internal capacity level is time-invariant.