Dynamic Decision Modeling for Viable Short and Long Term Production Policies: An HJB Approach
Abstract
This study introduces a mathematical framework to investigate the viability and reachability of production systems under constraints. We develop a model that incorporates key decision variables, such as pricing policy, quality investment, and advertising, to analyze short-term tactical decisions and long-term strategic outcomes. In the short term, we constructed a capture basin that defined the initial conditions under which production viability constraints were satisfied within the target zone. In the long term, we explore the dynamics of product quality and market demand to achieve and sustain the desired target. The Hamilton-Jacobi-Bellman (HJB) theory characterizes the capture basin and viability kernel using viscosity solutions of the HJB equation. This approach, which avoids controllability assumptions, is well suited to viability problems with specified targets. It provides managers with insights into maintaining production and inventory levels within viable ranges while considering product quality and evolving market demand. We numerically studied the HJB equation to design and test computational methods that validate the theoretical insights. Simulations offer practical tools for decision-makers to address operational challenges while aligning with the long-term sustainability goals. This study enhances the production system performance and resilience by linking rigorous mathematics with actionable solutions.