Two-stage production planning under stochastic demand for optimization cost of production fertilizer

Abstract

Fertilizer is always a major concern for achieving sustainable and efficient agriculture. Applying reasoned and customized fertilizers will require a significant increase in the number of formulae, involving increasing costs and the correct of the forecasting the right time to apply the suitable formulae. An alternative solution is given by two–stage production planning under stochastic demand, which is divided planning schedule into two periods. The primary stage has non-existing demand information, the inputs are the proportion of raw materials need for producing fertilizer products, the cost for purchasing materials, and the production cost. The total quantity of purchased material and produced products need to be defined to be used in the blending process to meet as small as possible paid cost. At the second stage, demand appears under scenarios and its respective possibilities. This stage will provide a solution for each happened scenario to achieve the best profit. This paper presents the two-stage approach, whose mathematical model is based on linear integer programming. Keywords: two-stage stochastic programming, demand uncertainty, planning, blending, fertilizer