A simulation-based approach to inventory management in batch process with flexible recipes

Batch processes are widely adopted in many manufacturing systems with raw materials from mining or agricultural industries. Due to variations in both raw material quality and market conditions, variations in the recipes are used in production. Such recipe flexibility is not on design but on the operation that allows adjustments of recipe items aiming to achieve better performance than traditionally fixed recipes. In this paper, we study the inventory investment, recipe selection and resource allocation decisions in batch process systems with flexible recipes. A two-stage stochastic mixed integer program formulation is developed for each period. Moreover, the system updates its inventory investment decisions based on new demand data from previous periods by a simulation-based approach. Benefits of implementing flexible recipes over traditional fixed recipes are investigated in the numerical studies.