Disruption management in production planning

Abstract We study the problem of recovering a production plan after a disruption, where the disruption may be caused by incidents such as power failure, market change, machine breakdown, supply shortage, worker no‐show, and others. The new recovery plan we seek after has to not only suit the changed environment brought about by the disruption, but also be close to the initial plan so as not to cause too much customer unsatisfaction or inconvenience for current‐stage and downstream operations. For the general‐cost case, we propose a dynamic programming method for the problem. For the convex‐cost case, a general problem which involves both cost and demand disruptions can be solved by considering the cost disruption first and then the demand disruption. We find that a pure demand disruption is easy to handle; and for a pure cost disruption, we propose a greedy method which is provably efficient. Our computational studies also reveal insights that will be helpful to managing disruptions in production planning. © 2005 Wiley Periodicals, Inc. Naval Research Logistics, 2005.