In this paper we consider multiperiodmixed 0-1 linearprogramming models under uncertainty. We propose a risk averse strategy using stochastic dominance constraints (SDC) induced by mixed-integer linear recourse as t...
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In this paper we consider multiperiodmixed 0-1 linearprogramming models under uncertainty. We propose a risk averse strategy using stochastic dominance constraints (SDC) induced by mixed-integer linear recourse as the risk measure. The SDC strategy extends the existing literature to the multistage case and includes both the first-order and second-order constraints. We propose a stochastic dynamic programming (SDP) solution approach, where one has to overcome the negative impact of the cross-scenario constraints on the decomposability of the model. In our computational experience we compare our SDP approach against a commercial optimization package, in terms of solution accuracy and elapsed time. We use supply chain planning instances, where procurement production, inventory, and distribution decisions need to be made under demand uncertainty. We confirm the hardness of the testbed, where the benchmark cannot find a feasible solution for half of the test instances while we always find one, and show the appealing tradeoff of SDP, in terms of solution accuracy and elapsed time, when solving medium-to-large instances. (C) 2014 Elsevier Ltd. All rights reserved.
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