A Real-time Production Control Problem of Failure Prone Systems with Demand Uncertainty

For the control problem of failure prone production systems with demand uncertainty, a near-optimal trinal hedging point control policy is proposed: two positive hedging points and a negative hedging point (backlog level below which extra production capacity should be purchased.) in general. The positive and negative hedging points are obtained by a decomposition method. Meanwhile, a method is introduced to reduce the trinal hedging point policy to a double hedging point policy, even just a single hedging point policy. Numerical results show us the circumstances for applying the policies and three conclusions about our method are obtained.