Stochastic lot sizing problem with nervousness considerations

In this paper, we consider the multistage stochastic lot sizing problem with controllable processing times under nervousness considerations. We assume that the processing times can be reduced in return for extra cost (compression cost). We generalize the static and static-dynamic uncertainty strategies to eliminate setup oriented nervousness and control quantity oriented nervousness. We restrict the quantity oriented nervousness by introducing a new concept called promised production amounts, and considering new range constraints and a nervousness cost function. We formulate the problem as a second-order cone mixed integer program (SOCMIP), and apply the conic strengthening. We observe the continuous mixing set substructure in our formulation that arises due the controllable processing times. We reformulate the problem by using an extended formulation for the continuous mixing set and solve the problem by a branch-and-cut approach. The computational experiments indicate that the reformulation reduces the root gaps and this helps to solve the problem in less computation times. Moreover, in our computational experiments we investigate the impact of new restrictions, specifically the additional cost of eliminating the setup oriented nervousness, on the total costs and the system nervousness. Our computational results clearly indicate that we could significantly reduce the nervousness costs and generate more stable production schedules with a relatively small increase in the total cost. (C) 2018 Elsevier Ltd. All rights reserved.