Supply Network Engineering: An Approach to Robust Capacity Allocation for Stochastic Production Processes*

The dynamics of supply networks can exhibit considerable complexity. Expected and unexpected events can reduce the production capacity available on average and put the timely satisfaction of customer demand at risk. In this paper we model supply networks as multiclass queueing networks and present an approach to robust capacity allocation with respect to perturbations of the production processes. To this end we consider the fluid model of a multiclass queueing network and use its stability radius to measure the robustness. The stability radius reflects the smallest decrease of production rate that destabilizes the network. Based on results concerning this measure we set up an optimization problem for the capacity allocation.