There is a probability p_strike that workers go on strike during production, changing the capacity from 6000 in the no-strike scenario, to a combined maximum of 4000 hours. In addition, labor requirements for Product 2 will also if a strike takes place according to the data in the table below.

	Product	Max.
	1 2 3 4
Start-up cost, $	50,000 40,000 70,000 60,000
Marginal revenue, $	70 60 90 80
Labor per unit, hours	5 3 6 4	6,000
Labor per unit during strike, hours	5 8 6 4	4,000

Formulate a two-stage stochastic program based on this information to maximize the expected net revenue. The decisions to manufacture a product have to be taken at the present time when set-up costs must be incurred. On the other hand, the decisions related to how much to manufacture have to be made during production (second-stage) at what time the uncertainty of strike has been resolved.

a) Formulate this problem as a stochastic program. For each scenario s ∈ {Strike,No Strike} define a set of production variables x_1,s, x_2,s, x_3,s, x_4,s

b) Replace the labor capacity constraint from the previous section with two new labor capacity constraints, one for each scenario.

c) Solve this problem in matlab for p_strike=0.3

d) Solve this problem in matlab for p_strike=0.9

Answer rating: 100% (QA)

a Formulate this problem as a stochastic program ... View the full answer