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Risk-averse two-stage stochastic programs in furniture plants

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Abstract

We present two-stage stochastic mixed 0–1 optimization models to hedge against uncertainty in production planning of typical small-scale Brazilian furniture plants under stochastic demands and setup times. The proposed models consider cutting and drilling operations as the most limiting production activities, and synchronize them to avoid intermediate work-in-process. To design solutions less sensitive to changes in scenarios, we propose four models that perceive the risk reductions over the scenarios differently. The first model is based on the minimax regret criteria and optimizes a worst-case scenario perspective without needing the probability of the scenarios. The second formulation uses the conditional value-at-risk as the risk measure to avoid solutions influenced by a bad scenario with a low probability. The third strategy is a mean-risk model based on the upper partial mean that aggregates a risk term in the objective function. The last approach is a restricted recourse approach, in which the risk preferences are directly considered in the constraints. Numerical results indicate that it is possible to achieve significant risk reductions using the risk-averse strategies, without overly sacrificing average costs.

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Acknowledgments

We are indebted to three anonymous referees whose valuable comments helped to improve both the content and presentation of this paper. The authors are grateful to the Luapa Company for collaborating with this research, Prof. Alyne Toscano Martins (Federal University of Triângulo Mineiro) for providing the technical report about Brazilian furniture and Prof. Paulo A. V. Ferreira (State University of Campinas) for suggesting an additional mean-risk discussion.

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Authors and Affiliations

  1. Department of Production Engineering, Federal University of São Carlos, Sorocaba, Brazil

    Douglas Alem

  2. Department of Production Engineering, Federal University of São Carlos, São Carlos, Brazil

    Reinaldo Morabito

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  1. Douglas Alem
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Correspondence to Douglas Alem.

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The research was partially supported by grants from FAPESP and CNPq.

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Alem, D., Morabito, R. Risk-averse two-stage stochastic programs in furniture plants. OR Spectrum 35, 773–806 (2013). https://doi.org/10.1007/s00291-012-0312-5

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