A bilinear programming model and a modified branch-and-bound algorithm for production planning in steel rolling mills with substitutable demand

In this paper, we address an instance of the dynamic capacitated multi-item lot-sizing problem (CMILSP) typically encountered in steel rolling mills. Production planning is carried out at the master production schedule level, where the various end items lot sizes are determined such that the total cost is minimised. Through incorporating the various technological constraints associated with the manufacturing process, the integrated production-inventory problem is formulated as a mixed integer bilinear program (MIBLP). Typically, such class of mathematical models is solved via linearisation techniques which transform the model to an equivalent MILP (mixed integer linear program) at the expense of increased model dimensionality. This paper presents an alternative branch-and-bound based algorithm that exploits the special structure of the mathematical model to minimise the number of branches and obtain the bound at each node. The performance of our algorithm is benchmarked against that of a classical linearisation technique for several problem instances and the obtained results are reported.