Optimal policy for a muti-product, multi-period, non-stationary, stochastic production and customization problem

This paper is concerned with a multi-product, multi-period, non-stationary, stochastic production and customization problem in which a firm wishes to satisfy multi-period stochastic demands for m products. The firm produces a generic product that can be customized into the m products. The lead time to produce the generic product is one period. The generic product can be customized into any of the m products immediately. Assume that the costs of production, customization, storage, and shortage are linear. Also assume that the unsatisfied demands for the m products at the firm in each period are lost. The objective of the firm is to find a production-customization policy that minimizes the expected cost over a planning horizon. We obtain the conditions that ensure that a myopic production-customization policy is optimal.