Ind. Eng. Chem. Res.

2010, 49, 3993–4017 3993

Planning and Scheduling under Uncertainty: A Review Across Multiple Sectors

Peter M. Verderame, Josephine A. Elia, Jie Li, and Christodoulos A. Floudas*
Department of Chemical Engineering, Princeton UniVersity, Princeton, New Jersey 08544

This paper provides an overview of the key contributions within the planning and scheduling communities
with specific emphasis on uncertainty analysis. As opposed to focusing in one particular industry, several
independent sectors have been reviewed in order to find commonalities and potential avenues for future
interdisciplinary collaborations. The objectives and physical constraints present within the planning and
scheduling problems may vary greatly from one sector to another; however, all problems share the common
attribute of needing to model parameter uncertainty in an explicit manner. It will be demonstrated through
the literature review that two-stage stochastic programming, parametric programming, fuzzy programming,
chance constraint programming, robust optimization techniques, conditional value-at-risk, and other risk
mitigation procedures have found widespread application within all of the analyzed sectors. This review is
the first work which attempts to provide a comprehensive description of the advances and future directions
for planning and scheduling under uncertainty within a variety of sectors.

1. Introduction
Planning and scheduling are interrelated activities dealing with
the management of specified systems. As opposed to using
heuristics to ascertain the appropriate management decisions,
mathematical models which accurately portray the physical
realities of these systems can be utilized. Deterministic opti-
mization theory and algorithms aim at efficiently and rigorously
determining the optimum solution as measured by the objective
function within the feasible region defined by the constraint set.
It should be noted that stochastic algorithms exist such as genetic
algorithms which can generate feasible solutions; however, only
deterministic optimization algorithms can provide a rigorous
assertion of solution optimality especially when system variables
are continuous in nature. As a result, planning and scheduling
problems are commonly formulated as optimization models
which are solved by means of deterministic optimization
algorithms. For many circumstances, nominal system conditions
are assumed when formulating and implementing these various
forms of optimization models; however, the robustness of the
final solution could be greatly enhanced if the uncertainties
associated with the various system parameters were explicitly
considered in the model formulation. For example, within the
chemical industry the inclusion of processing time, demand, and/
or market price uncertainty in the planning and scheduling of
plant activities can lead to a dramatic enhancement in the actual
performance of the plant in the face of unfavorable realization
of uncertain parameters.
The objective of this review paper is to demonstrate that there
exists general commonalities in the uncertainty approaches used
to take into account parameter uncertainty at the planning and
scheduling levels within various fields such as the chemical,
petrochemical, and pharmaceutical industries, energy planning,
power generation system planning, farm planning, forest plan-
ning, waste management, water resources management, trans-
portation planning, and other application sectors. All of these
sectors have perhaps differing definitions related to planning
and scheduling activities, and the constraint sets and objective
function forms may not share a great deal of commonality. Yet,
the unifying theme related to all planning and scheduling models
* Corresponding author. Tel.: 1-609-258-4595. E-mail address:
floudas@titan.princeton.edu.
10.1021/ie902009k  2010 American Chemical Society
Published on Web 04/08/2010
is the fact that within a given mathematical model there exist
system parameters which are uncertain in nature, and this
parameter uncertainty must be taken into account in an explicit
manner. Two-stage stochastic programming, parametric pro-
gramming, fuzzy programming, chance constraint programming,
robust optimization techniques, and conditional value-at-risk
represent different frameworks to take into account parameter
uncertainty, and it will be shown through the industry-specific
literature review that all six methodologies have found wide-
spread application within the various sectors. The primary goal
of this review paper is to provide researchers with a general
roadmap highlighting the key issues and commonalities found
within several different types of planning and scheduling under
uncertainty problems.
Floudas and Lin,1,2 Shapiro,3 Shah,4 Mula et al.,5 Varma et
al.,6 Li and Ierapetritou,7 and Maravelias and Sung8 all provided
reviews related to particular elements of the planning and
scheduling problem as it pertains to the chemical, petrochemical,
and pharmaceutical industries. Weintraub and Bare9 provided
a review on modeling strategies for forest management from
an operations research perspective. Nelson10 presented an
overview of forest-level models used to simulate various
management scenarios, and Weintraub and Romero11 conducted
a review comparing the methodologies applied to agricultural
and forestry management. Reviews also exist in the areas of
fleet sizing, routing and scheduling,12 stochastic vehicle
routing,13-15 and airline planning under uncertainty.16 However,
there is currently no review paper which covers planning and
scheduling under uncertainty for several independent sectors.
The remainder of the paper will be divided first into sections
based upon industrial sector designation. For example, the first
section pertains to the chemical, petrochemical, and pharma-
ceutical industries where planning and scheduling under both
deterministic and uncertain system conditions will be presented.
After outlining the contributions in all relevant sectors, specific
challenges related to planning and scheduling under uncertainty
will be presented so as to highlight key challenges and
opportunities. Lastly, the key findings of this review paper will
be outlined in the conclusions section.
3994 Ind. Eng. Chem. Res., Vol. 49, No. 9, 2010
2. Chemical, Petrochemical, and Pharmaceutical
Industries (CPPI)
Within the chemical, petrochemical, and pharmaceutical
industries (CPPI), supply chain management can be broadly
defined as the comprehensive supervision of the company’s
supply chain components under varying time scales, and Levi
et al.,17 Shah,18,4 and Varma et al.6 presented the key issues
and challenges related to supply chain management. Three vital
components of supply chain management are strategic planning,
operational planning, and scheduling. Strategic planning deter-
mines the long-term direction of the supply chain while
considering changing market and industry trends. The time
horizon associated with strategic planning is on the order of
years, and decisions regarding the building of new sites,
elimination of existing facilities, retrofitting of plants, adding
or eliminating raw material suppliers, and any other significant
supply chain network topology alterations are taken into account
at the strategic planning level. Due to the relatively long time
horizon associated with strategic planning, uncertainty must be
explicitly taken into account. With the supply chain network
topology in place, the operational planning level is concerned
with determining the required production levels and raw material
requirements for the multiple production facilities present within
the company’s supply chain. The operational planning time
horizon is usually on the order of months, and in order to
facilitate the maximization of profit and the minimization of
inventory and customer dissatisfaction, the multiple forms of
system uncertainty need to be taken into account within any
operational planning model. The production targets and raw
material requirements supplied by the operational planning level
are subsequently used at the scheduling level in order to
determine the daily operations of a given facility within the
supply chain of interest. Due to the fact that any scheduling
model must rigorously take into account the detailed plant
characteristics, the time horizon associated with scheduling
decisions is on the order of days; however, process uncertainty
must still be factored into any scheduling analysis in order to
ensure that the final plant schedule is feasible even when
unfavorable process conditions have been realized. Since the
scheduling level relies on the production targets and raw material
requirements supplied by the operational planning level, the
effective integration of operational planning and scheduling is
a major issue within the realm of supply chain management.
Having provided an overview of the planning and scheduling
operations involved within the chemical, petrochemical, and
pharmaceutical industries, a more detailed presentation of the
planning and scheduling levels will be presented when consider-
ing both deterministic and uncertain system conditions.
2.1. Deterministic Contributions in CPPI. 2.1.1. Sche-
duling. The scheduling of a plant involves determining the
allocation of plant resources. Tasks must be assigned to the
process units that either operate in batch, semicontinuous, or
continuous mode, and the duration and amount of processed
material related to those assigned tasks must be determined.
When considering multiproduct and multipurpose plants, a
scheduling model typically takes the form of a mixed-integer
linear programming (MILP) problem where binary variables
denote the activation of a task and continuous variables are used
to quantify material flows and processing times. Task allocation,
material balance, and sequencing constraints are common
features of a scheduling model and help to define the physical
system under investigation. Potential objectives used in part to
determine a given plant’s schedule are profit maximization
within a finite time horizon, the minimization of costs associated
with production and or customer dissatisfaction within a finite
time horizon, and makespan minimization where the objective
is to satisfy the customer supplied demand profile while
minimizing the required time horizon. The supplied demand
figures can either be expressed as intermediate demand due dates
or aggregate demand requirements due at the end of the time
horizon. Storage conditions for intermediate states also need to
be taken into account when scheduling plant activities, and
Floudas and Lin1,2 provided an overview of the various storage
policies such as unlimited intermediate storage (UIS), no
intermediate storage (NIS), zero-wait (ZW), and finite inter-
mediate storage (FIS).
Depending upon the required production recipes and the
degree of production recipe similarity between the various final
states, different process system representations have been
adopted within the scheduling community. For example, Kondili
et al.19 developed the state-task-network representation (STN),
which can be defined as a directed graph with both state and
task nodes. Pantelides20 later extended the STN representation
to the resource-task-network (RTN) form which provides a
uniform description of all available resources, such as materials,
processing equipment, storage, and utilities. It should be noted
that for simple processes where all products follow the same
sequence of tasks and different stages can be represented by
only one unit or multiple parallel units, a sequential representa-
tion can be adopted where material balances do not need to be
taken into account explicitly.
One of the fundamental issues within scheduling is the choice
of the time representation. As noted by Floudas and Lin1,2 early
attempts at scheduling plant activities relied on discretizing the
time horizon into a number of time periods;21-23,19,24,20,25-29
however, discrete-time models (uniform and nonuniform) do
not accurately represent the continuous-time nature of the plant
and by definition lead to suboptimal solutions. As a result,
continuous-time models are the preferable option, and Mendez
and Cerda,31,32,30 Gupta and Karimi,33 and Nadal et al.34 have
all developed continuous-time models for sequential processes.
When considering plants that are modeled through a STN or
RTN representation, the relevant continuous-time models can
be broadly classified into the three categories of slot-based,35-40
global event-based,41-43 and unit-specific event-based.44-54
Each of the given modeling approaches has its own inherent
advantages and disadvantages; however, it should be noted that
the work of Shaik et al.50 indicated that the unit-specific event-
based models result in smaller problem sizes when compared
to both slot-based and global event-based models and conse-
quently are often computationally superior. For a more in-depth
analysis of the various issues surrounding scheduling, consult
the reviews of Floudas and Lin,1,2 Mendez et al.,55 Pitty and
Karimi,56 and Barbosa-Povoa.57 A recent advance by Li and
Floudas58 introduces an approach for the determination of the
optimal number of event points which can be used for most
continuous-time models in short-term scheduling.
2.1.2. Planning. A supply chain network is composed of two
classes of nodes that the company in question has the ability to
modify. The first node class represents the various raw material
suppliers, and the second class of nodes encompasses the
production facilities. Strategic planning is primarily concerned
with critically evaluating the supply chain in terms of adding
and/or removing nodes within the network, as well as modifying
the characteristics of existing production nodes in order to
maximize the company’s future performance, which can be
measured in both an industry- and company-specific manner.
A company can decide to change the distribution of suppliers

by adding or eliminating supplier nodes based upon various
trade-offs, and production facility composition similarly can be
altered by either adding or subtracting production centers from
the supply chain topology based upon a cost/benefit analysis.
The addition or subtraction of nodes, as well as the retrofitting
of existing production nodes are constrained by both internal
and external supply chain conditions. Given the objective of
maximizing some performance metric subject to relevant system
constraints, the strategic planning problem is often formulated
as an optimization model taking the form of a mixed-integer
linear programming (MILP) or mixed-integer nonlinear pro-
gramming (MINLP) problem. Shapiro3 provided an overview
of the key challenges found within the area of supply chain
planning.
Grossmann59 demonstrated how the use of optimization
techniques and mathematical modeling can facilitate all stages
of supply chain management, and Chen and Pundoor,60 Dick-
ersbach,61 and Kreipl and Pinedo62 all dealt with the planning
and scheduling of a static supply chain. Verderame and
Floudas63 developed a mixed-integer linear programming model
for the management of a multisite production and distribution
network. Sousa et al.64 addressed the issue of supply chain
design within a multilevel planning scheme and applied the
methodology to an industrial case study. Bassett and Gardner65
demonstrated that the quantitative analysis of a supply chain at
the strategic planning level can dramatically impact a company,
and as a result, strategic planning shall remain a potent area of
research for the foreseeable future. Papageorgiou66 emphasized
that an integrated approach to supply chain design which
considers the entire supply chain is a necessary approach for
the strategic planning problem. You and Grossmann67 developed
a mixed-integer nonlinear programming model which addresses
several fundamental issues within supply chain design, and
Chopra and Meindl,68 Daskin,69 Owen and Daskin,70 Zipkin,71
Cachon and Fisher,72 Kok and Graves,73 and Tsiakis et al.74 all
made contributions toward addressing the issues of facility
location and inventory management within the strategic planning
context. Naraharisetti et al.75 recently proposed a supply chain
redesign methodology which applied multimodal optimization
using a hybrid evolutionary algorithm. Overall, the field of
strategic planning has great potential for further advancement
due to the inherent complexity of supply chains, and the
consideration of uncertainty can greatly enhance the efficacy
of supply chain decision-making.
The primary objective of an operational planning model is
to provide realizable production targets, and therefore, an
operational planning model should take into account not only
customer demands but also the production capacity of the plant
in question. One approach is to apply a scheduling model over
the entire planning time horizon since a scheduling model
rigorously takes into account the production capacity of the
plant. Model tractability issues, however, greatly diminish the
viability of this approach, and therefore, certain aggregation or
relaxation schemes have been adopted when formulating
operational planning models.
Wilkinson et al.76 proposed a planning model which is an
aggregation of the scheduling model based upon the work of
Kondili et al.19 The aggregation scheme involves the discreti-
zation of the time horizon into time periods and the grouping
of related scheduling level constraints and variables into
aggregate resource, capacity and production constraints and
variables. It should be noted that Bassett et al.77 also proposed
a time-based aggregation scheme similar to the discretization
scheme proposed by Wilkinson et al.76 where the values of
Ind. Eng. Chem. Res., Vol. 49, No. 9, 2010 3995
variables are only calculated at the end of a discrete time period.
The discretization of the time scale and the aggregation of the
scheduling level constraints and variables reduces the complexity
of the original scheduling model and allows the model to be
applied over the entire planning horizon. The proposed ag-
gregation scheme is intended to provide only a tight upper bound
on the production capacity of the plant in question, however,
and does not rigorously take into account the production capacity
of the plant. Kallrath and co-workers78-83 developed a com-
prehensive multisite, discrete-time planning model which divides
the planning horizon into commercial periods and then further
discretizes those commercial periods into production periods.
Another type of aggregation scheme is a unit aggregation
approach in which a plant is modeled by its set of bottleneck
units. Sung and Maravelias84 noted that unit aggregation
schemes are often adopted in discrete manufacturing industries.
Verderame and Floudas85 developed a discrete-time operational
planning model based upon the unit aggregation approach which
has been shown through computational studies to be capable
of providing a production profile which is a tight upper bound
on the production capacity of the facility under investigation.
The potential downside of a unit aggregation approach is that
it disregards any sequencing effects; meaning, it assumes that
each of the bottleneck units can produce one or more final states
without any upstream or downstream processing. As a result,
the unit aggregation scheme can cause the planning model to
overestimate the true production capacity of the plant. Dogan
and Grossmann86 addressed the issue of accurately taking into
account the sequencing of tasks within a process unit at the
planning level by solving a variant of the traveling salesman
problem within a detailed planning model, and they applied it
to a case study of parallel batch reactors. Suerie87 addressed
planning with multiple intermediate demand due dates through
a discrete-time proportional lot-sizing and scheduling problem
where at most one changeover is allowed in each period.
Grunow et al.88 applied a hierarchical planning formulation for
the campaign planning of multistage batch processes which
involve coordination between production facilities.
From a modeling perspective, the nature of the operational
planning problem leads to MILP models. Yet, the length of the
planning time horizon and the objective of the planning model
providing feasible production targets can lead to problems which
are difficult to solve using traditional branch and bound
algorithms based upon linear programming relaxation. In order
to address this computational issue, alternative decomposition/
relaxation approaches have been applied. Benders decomposition
and Lagrangian relaxation are two possible techniques which
take advantage of the model’s structure and can be used in order
to reduce the complexity of the overall problem by solving
relaxations of the original problem in an iterative manner. Aardal
and Larsson89 applied Benders decomposition to production
planning problems, and Gupta and Maranas90 used a Lagrangian
relaxation procedure based upon the planning model of Mc-
Donald and Karimi91 to solve a production planning problem.
While Benders decomposition and Lagrangian relaxation can
facilitate the solution of planning problems, they are based on
the exploitation of a specific model structure, which may not
be applicable for every planning problem.
Due to the nature of large-scale models which give rise to
computational tractability issues, planning models are formulated
through various types of scheduling model relaxations. By
definition, these planning models cannot rigorously represent
the production capacity of plant, and so, the aggregate produc-
tion targets supplied by the planning model often overestimate
3996 Ind. Eng. Chem. Res., Vol. 49, No. 9, 2010
the production capacity of the plant. Unless a scheme is adopted
which attempts to refine the planning level model by taking
into account the key scheduling component results, the planning
model may lead to the suboptimal allocation of resources. The
integration of planning and scheduling should address the
inaccuracies within the planning model by allowing for the two-
way interaction between the planning and scheduling models.
2.1.3. Integration of Planning and Scheduling. Planning
and scheduling have evolved as independent entities; however,
the treatment of operational planning and scheduling as inde-
pendent entities often leads to inefficient allocation of resources.
Shah4 noted that on average less than 10% of the material being
processed by a pharmaceutical firm ends up as final product.
Shobrys and White92 reported that the integration of planning
and scheduling can lead to increased profit levels and a reduction
in committed capital. For example, Exxon Chemicals estimated
that the adoption of integration techniques led to an annual
reduction in operating costs by 2% and operating inventory by
20%.92 DuPont has also noted that the integration of planning
and scheduling played a part in reducing the working capital
tied up in inventory from $160 to $95 million for a polymers
facility.92 The economic incentives for the integration of
planning and scheduling are great and realizable; however, there
is still substantial scientific debate regarding what is the optimal
framework for the integration of planning and scheduling. In
general, the planning level is typically an aggregated, simplified
model which attempts to provide realizable production targets
to a scheduling model, which in turn determines the detailed
schedule of plant operations. A two-way interplay between the
planning and scheduling levels needs to occur in order to
efficiently integrate the planning and scheduling levels, and
iterative schemes and/or rolling horizon approaches have been
utilized in order to address the integration of planning and
scheduling. Maravelias and Sung8 provided an overview of the
key challenges and opportunities present within the field of
integrated planning and scheduling.
Papageorgiou and Pantelides93 proposed a decomposition
scheme having an upper level planning model and a lower level
scheduling model. The proposed framework addresses the
planning and scheduling of batch and semicontinuous plants.
Bassett et al.28 presented an aggregate planning model that
determines the upper level production targets and the time
horizon for each scheduling problem, and similarity analysis is
used to group scheduling subproblems into families where
representative problems are solved in order to determine the
feasibility of the overall scheduling problem. Subrahmanyam
et al.94 generated an iterative framework for the planning and
scheduling of a chemical plant which utilizes the fact that an
aggregate planning model is a relaxation of the scheduling
model. Zhu and Majozi95 proposed a formulation for the
planning and scheduling of a multipurpose plant. Munawar and
Gudi96 developed a multilevel planning, scheduling, and
rescheduling framework which uses control theory to minimize
the revision of aggregate production targets so as to avoid the
violation of customer commitments. Sung and Maravelias84
formulated an approach which utilizes detailed scheduling
information in order to construct a convex hull of the feasible
production levels along with convex underestimation of the
associated production cost so as to refine the planning level
model. Dogan and Grossmann97 presented a decomposition
based method for the simultaneous planning and scheduling of
a multiproduct plant. Amaro and Barbosa-Povoa98 considered
the planning and scheduling of industrial scale supply chains
and applied their hierarchical approach to a pharmaceutical
industrial case study. Li and Ierapetritou99 proposed a decom-
position framework for a bilevel optimization problem having
an upper level planning problem and multiple lower level
scheduling subproblems. The proposed decomposition scheme
iterates between the planning and scheduling levels until the
lower bound provided by the planning level equals the combined
upper bound of the scheduling subproblems.
Many of the aforementioned integration approaches require
the entire time horizon to be scheduled before providing any
feedback to the planning level within the iterative scheme, which
can lead to a substantial amount of computational effort when
the given methodologies are applied to large-scale, industrial
applications. A rolling horizon approach addresses this com-
putational issue by decomposing the time horizon required to
be scheduled for each iteration and minimizing the number of
required iterations. Within the rolling horizon framework, the
time horizon is discretized into periods, and Dimitriadis et al.100
proposed both forward and reverse rolling horizon approaches.
Stefansson and Shah101 considered the integration of planning
and scheduling within the pharmaceutical industry and presented
a multiscale planning and scheduling framework using a moving
horizon approach where information availability is explicitly
taken into account at both the planning and scheduling levels.
Verderame and Floudas85 developed a framework for the
effective integration of operational planning and medium-term
scheduling for large-scale industrial batch plants using a two-
way feedback loop implemented within a rolling horizon
scheme. Overall, the rolling horizon framework requires less
iterations and does not require the scheduling of the entire
horizon for each iteration.
2.2. Uncertainty Contributions in CPPI. Before a detailed
exposition of the uncertainty contributions made within CPPI
can be undertaken, the various forms of uncertainty need to be
presented. Within CPPI, market prices, processing times,
demand amount and due data, unit capacities, unit breakdowns,
transportation time, and cost potentially can be all uncertain.
The uncertainty related to a subset of these parameters can be
explicitly taken into account through preventative approaches
such as two-stage stochastic programming, parametric program-
ming, fuzzy programming, chance constraint programming,
robust optimization techniques, and risk mitigation techniques
while the remaining elements need to be addressed through
online optimization techniques after parameter realization. For
example, market prices, processing times, demand due date and
amount, unit capacities, transportation time, and cost can all be
modeled as uncertain elements following a given distribution,
and the aforementioned preventative approaches can explicitly
take into account the given forms of uncertainty. On the other
hand, unit breakdowns and new orders are events which are
best modeled in a reactive manner after realization by means
of reactive scheduling techniques that can handle the onset of
unit breakdowns, as well as new product orders.
2.2.1. Scheduling. As previously stated, scheduling provides
a detailed outline of plant activities on a day-to-day basis. Due
to the relatively short time horizon, it is often assumed that all
system parameters are deterministic in nature. However, Janak
et al.102 demonstrated that only slight variations in system
conditions can render a schedule infeasible. For example, minor
changes in processing time and demand requirements can result
in an existing scheduling becoming infeasible, and small
fluctuations in market prices often can lead to a scheduling result
being deemed suboptimal. Also, unit breakdowns and additional
product orders which are realized after the schedule has been
enacted need to be addressed in a systematic way at the

scheduling level. Several methodologies exist for the explicit
consideration of these types of uncertainty within a scheduling
model, and Li and Ierapetritou7 provided a comprehensive
overview of scheduling under uncertainty.
The uncertainty associated with the given system parameters
can be characterized in three different ways. If there is not
enough information to construct an accurate estimation of the
uncertain parameter’s distribution, then the bounded distribution
form is often adopted where the uncertain parameter is assumed
to take on values within a specified range defined by an upper
and lower bound. If there is sufficient information to construct
a reliable distribution for the parameter, then the uncertain
parameter can be represented in a probabilistic fashion similar
to the representations presented within the work of Petkov and
Maranas103 and Janak et al.102 An alternative to the bounded
and known distribution cases is the use of fuzzy sets as noted
by Li and Ierapetritou.7
Having defined the forms of uncertainty present within a
given scheduling model, the next step is to select an appropriate
modeling approach which can explicitly take into account these
aforementioned forms of parameter uncertainty. One methodol-
ogy is the two-stage stochastic programming approach where
the first-stage contains those variables which must be ascertained
before the uncertain parameters are realized, and the second-
stage is composed of those variables which represent recourse
decisions that are enacted upon the realization of the given
uncertain parameters. The first-stage objective function term is
deterministic in nature while the second-stage term involves an
expectation evaluation. In order to address the expectation
evaluation, a finite number of uncertain parameter scenarios can
be generated with the recourse variables being indexed by
scenario so that every possible parameter realization has an
associated recourse action. The downside of the scenario
generation approach is the prohibitive growth in model size as
the number of considered scenarios increases. An alternative
to scenario generation is the use of a distribution-based approach
where the expectation of the recourse objective function term
is ascertained through the integration of the given multivariate
probability distribution function. For the distribution-based
approach, the problem size is considerably smaller, but the
formulation is now nonlinear. In order to remove the nonlinearity
from the problem, techniques such as Monte Carlo, Gaussian
quadrature, etc. are used. These methodologies may become
computationally expensive as the number of uncertain param-
eters increase. Despite some of its potential shortcomings,
Balasubramanian and Grossmann,104 Goel and Grossmann,105
and Bonfill et al.106 all demonstrated that two-stage stochastic
programming can be applied to the scheduling under uncertainty
problem. Colvin and Maravelias107 also developed a model for
the scheduling of product testing during its developmental stages
that utilized stochastic programming in order to determine the
optimum testing period, as well as the level of resources
allocated for a given testing operation.
Parametric programming is another alternative toward model-
ing parameter uncertainty. Based upon the theory of sensitivity
analysis, the objective of parametric programming is to define
a function which maps the uncertain parameter values to a given
optimal solution for the entire uncertain parameter space.
Parametric programming algorithms attempt to construct the
aforementioned function without having to exhaustively enu-
merate all possible uncertain parameter realizations. Gal and
Nedoma108 developed an algorithm to solve multiparametric
linear programming problems based upon the Simplex algo-
rithm. Acevedo and Pistikopoulos109 extended the field of
Ind. Eng. Chem. Res., Vol. 49, No. 9, 2010 3997
parametric programming to address multiparametric mixed-
integer linear programs, and Dua et al.110 made significant
contributions in the area of multiparametric mixed-integer
quadratic problems. Acevedo and Salgueiro111 presented a novel
algorithm for the solution of convex multiparametric nonlinear
programming problems. With regard to scheduling applications,
Thompson and Zawack112 developed a framework to solve an
integer programming model for job shop scheduling which
modeled uncertainty by means of parametric programming, and
Ryu and Pistikopoulos113 applied parametric programming to
scheduling problems. Ryu et al.114 developed a proactive
scheduling approach using parametric programming to take into
account processing time and equipment availability. The func-
tion generated from the multiparametric programming meth-
odology allows for the complete mapping of uncertain parameter
values; thus, rescheduling requires only function evaluation and
no additional optimization operations. Li and Ierapetritou115,116
utilized multiparametric programming to take into account
multiple forms of parameter uncertainty within both the objec-
tive function and constraint set and demonstrated that parametric
programming is a rigorous way of generating a set of schedules
which can accommodate all possible realizations of parameter
uncertainty. Despite its many attractive modeling features, it
should be noted that parametric programming entails solving a
series of optimization problems in an iterative approach, and
so, the required computational time often may make the
application of parametric programming to large-scale industrial
problems challenging.
In many situations, viable alternatives to the two-stage
stochastic programming and parametric programming ap-
proaches are chance constraint programming, robust optimiza-
tion techniques, and fuzzy programming. Based upon the work
of Charnes and Cooper,117-119 chance constraint programming
involves replacing constraints containing uncertain parameters
with their respective probabilistic forms which explicitly take
into account the stochastic nature of the uncertain parameters.
The probabilistic constraints are then reformulated into a
deterministic form using in part the distribution information for
the various uncertain parameters. Orcun et al.120 and Petkov
and Maranas103 applied chance constraint programming to take
into account parameter uncertainty at the scheduling level. The
major downside of chance constraint programming within the
realm of scheduling is that it cannot guarantee the feasibility
of a given schedule with regard to the specific realization of
the uncertain parameters. For example, the obtained solution
may not be feasible even for the nominal system conditions. In
order to address this issue, robust optimization techniques have
been developed where probabilistic constraints are transformed
into their deterministic counterparts which then augment the
nominal mathematical model. Robust optimization tech-
niques121-130,102,131 guarantee that the obtained solution is
feasible for the nominal set of system conditions, as well as
robust with regard to the multiple forms of uncertainty present
within the system under investigation. The robust optimization
framework entails first expressing the true parameter values
through the declaration of random variables, then the formulation
of probabilistic constraints, and finally, the transformation of
these probabilistic constraints into their deterministic counter-
parts, which are added to the existing model. Lin et al.130 and
Janak et al.102 developed the robust optimization theory for
general MILP models and applied robust optimization tech-
niques for both bounded and known distribution cases when
aggregate demands, processing times, and/or prices are uncer-
tain. When distribution information is not available, the use of
3998 Ind. Eng. Chem. Res., Vol. 49, No. 9, 2010
fuzzy set theory can be utilized when modeling uncertain
parameters, and the fuzzy programming method treats these
uncertain parameters as fuzzy numbers and the constraints
containing these uncertain elements as fuzzy sets. Balasubra-
manian and Grossmann,132 Wang,133 and Petrovic and Duenas134
applied fuzzy programming to the problem of scheduling under
uncertainty.
When dealing with new product orders, unit breakdowns, and
other system events which occur during the application of a
schedule, the aforementioned preventive scheduling methodolo-
gies are not applicable, and another approach has to be adopted
in order to adapt the existing scheduling to these changing
system conditions. Reactive scheduling is a method of online
optimization which can facilitate the rescheduling of the plant
so as to take into account these unforeseen events. There are
several different approaches toward reactive scheduling. Li and
Ierapetritou7 provided an overview of reactive scheduling, and
Grotschel et al.135 detailed the various facets of online optimiza-
tion for large-scale systems. Rodrigues et al.,136 Vin and
Ierapetritou,137 and Mendez and Cerda30 all contributed to the
field of reactive scheduling through novel methodologies. Also,
Janak et al.138,139 developed a rigorous reactive scheduling
framework which is capable of systematically taking into
account new product orders and machine breakdowns and
applied the given framework to a large-scale industrial case
study in order to demonstrate the viability of the proposed
approach.
2.2.2. Planning. In all of the planning models mentioned in
section 2.1.2, it is assumed that the system parameters are at
their nominal values. Given the duration of the planning time
horizon under consideration, the robustness of the planning
decisions would be greatly enhanced if the uncertain nature of
some system parameters were factored into the analysis. For
example, demands, processing times, and price parameters are
potentially all uncertain in nature, and the explicit consideration
of the uncertainty associated with these parameters could lead
to enhanced planning results. Joung et al.140 acknowledged the
detrimental effect that neglecting the uncertain nature of
demands can have on company operations and in response to
this issue developed an optimization model augmented with a
simulation component for the management of a supply chain
under demand uncertainty. Zimmermann141 noted that the
problem structure itself can often dictate the optimal choice for
the type of uncertainty analysis, and so, multiple uncertainty
approaches have been applied within the field of planning under
uncertainty. Despite both its academic and industrial signifi-
cance, planning under uncertainty remains an open problem
within the literature as noted in the reviews by Sahinidis142 and
Mula et al.5
Two-stage stochastic programming is one possible framework
for modeling parameter uncertainty at the planning level.
Ierapetritou et al.143 applied a two-stage stochastic programming
approach to the operational planning under uncertainty problem.
Wu and Ierapetritou144 presented a hierarchical approach to
planning and scheduling under uncertainty. The proposed
planning component models uncertainty by means of multistage
programming where the overall horizon is discretized into time
periods based upon the given system parameters’ degree of
certainty which vary inversely with the time horizon. As the
relative uncertainty increases, the number of scenarios used to
represent the stochastic nature of the relevant parameters
increases, and the scenarios are generated by sampling the
underlying probability distribution of each uncertain parameter
under consideration. Khor et al.145 utilized a scenario-based two-
stage stochastic programming approach along with Markowitz’s
mean-variance model to address planning under multiple forms
of uncertainty within the petrochemical industry. Khor et al.145
acknowledged the exponential rise in model size with the
increase in the number of considered scenarios due to the
mandated increase in the corresponding number of variables
and constraints. Colvin and Maravelias146 developed a multi-
stage stochastic programming model for clinical trial planning
in new drug development, which is a challenging planning
problem within the pharmaceutical industrial. They considered
a reduced set of scenarios without sacrificing the accuracy of
the uncertainty representation, which is accomplished by means
of exploiting the inherent structure of the problem. Ahmed and
Sahinidis147 developed a two-stage stochastic planning under
uncertainty model that minimizes the actual cost of the first-
stage model and the expected cost of the second-stage model
while also minimizing the variance of the expected cost of the
stochastic inner problem. As a result, the actual cost of the
realized scenario remains relatively close to the expected cost.
Gupta and Maranas148,149 formulated a two-stage stochastic
supply chain planning model with an outer deterministic
production site component and an inner recourse supply chain
management component which is dependent upon the realization
of customer demand. Employing duality theory, Gupta and
Maranas148,149 constructed the feasible space of the inner
problem independent of the demand realization and then
considered the realization of certain demand levels in a
probabilistic fashion for the purposes of generating the optimal
policy for the supply chain. Akin to the scenario-based two-
stage stochastic programming approach, Levis and Papageor-
giou150 proposed a multisite planning model for the pharma-
ceutical industry which attempts to coordinate drug portfolio
management along with supply chain design in order to
maximize viable patent lifetime and profits. This approach
considers the stochastic nature of clinical trials through a
scenario-based approach where a potential drug can either
succeed or fail, and Levis and Papageorgiou150 presented an
aggregated model to address the aforementioned planning
objectives while concurrently taking into account all possible
drug development outcomes. Overall, two-stage stochastic
programming makes the assumption that the problem can be
decoupled into an outer problem which is independent of
parameter uncertainty and an inner problem where recourse
decisions are made based upon the realization of the given
parameter uncertainty. As noted by Clay and Grossmann,151 it
is often the case within the field of planning that it is not optimal
nor computationally efficient to decouple the problem in the
aforementioned manner.
Chance constraint programming117-119 is a common approach
toward dealing with parameter uncertainty. Petkov and Ma-
ranas103 introduced chance constraint programming within a
multiperiod planning and scheduling framework for multiproduct
batch plants with uncertain demand profiles due at the end of
each period. Li et al.152 acknowledged the various limitations
of two-stage stochastic programming and in response utilized
chance constraint programming to take into account the multiple
forms of uncertainty such as demand that should be considered
when conducting refinery planning. Within this work, the
objective function expectation terms which are dependent upon
the realization of uncertain parameters are approximated by
piecewise linear functions. You and Grossmann67 introduced
chance constraint programming when considering the design
of responsive supply chains under demand uncertainty. Li and
Ierapetritou7 conducted work not only on the practical applica-

tion of chance constrained programming but also the theoretical
development of the methodology. Mitra et al.153 utilized chance
constraint programming when addressing the problem of
midterm supply chain planning under uncertainty. The limitation
of chance constraint programming is that the chance constraints
representing the deterministic reformulation only mandate
feasibility for a specified probability distribution and do not
guarantee that the solution is feasible for any specific realization
of the uncertain parameter(s). In contrast, the robust optimization
framework possesses the inherent advantage that it not only
explicitly takes into account the various forms of parameter
uncertainty but also ensures that the obtained solution is feasible
for the nominal system conditions. Recently, Verderame and
Floudas131 extended the work of Lin et al.130 and Janak et al.102
for the explicit consideration of demand due date and demand
amount uncertainty at the operational planning level. With regard
to parametric programming, Pistikopoulos and Dua154 demon-
strated that parametric programming can be used to address
certain variants of the planning under uncertainty problem, and
Ryu et al.155 developed a bilevel programming framework for
supply chain planning which addressed uncertainty by means
of parametric programming.
Based upon the work of Artzner et al.,156 Ogryczak,157 and
Rockafellar and Uryasev,158,159 conditional value-at-risk (CVAR)
theory poses a potentially attractive alternative to the afore-
mentioned uncertainty approaches, and it has been used
extensively within the financial sector in order to mitigate risk
as noted by Krokhmal et al.,160 and Rockafellar and Uryasev,158
and Mansini et al.161 have applied CVAR to the portfolio
management problem originally presented within the work of
Markowitz.162 Conditional value-at-risk represents an advance
over established value-at-risk (VAR) theory, which has been
explicitly described within the works of Staumbaugh,163 Pritz-
ker,164 Jorion,165 and Duffie and Pan,166 and it has been
documented that CVAR has several important advantages over
VAR. For example, conditional value-at-risk represents a more
pessimistic loss level when compared to value-at-risk, and it
also features the important property of maintaining convexity
regardless of what type of probability distribution being
utilized.158-160
Both value-at-risk and conditional value-at-risk seek to guard
against unfavorable realization of uncertain parameters by going
beyond expectation evaluation when expressing the uncertainty
of system parameters. Having defined a loss function applicable
for the system of interest, both value-at-risk and conditional
value-at-risk theory can be used in order to constrain the level
of the loss function depending upon the investor’s degree of
risk aversion. Value-at-risk can be defined as the minimum loss
that is expected to be exceeded with a probability of (1 - R),
while conditional value-at-risk is the expected loss given that
the loss is greater than the value-at-risk for a given confidence
level, R. Conditional value-at-risk is the average of the
probabilistic loss function’s tail defined by the lower and upper
bounds of the value-at-risk and maximum loss, respectively.
Conditional value-at-risk represents a more pessimistic loss level
when compared to value-at-risk, and so, it is often the preferable
representation of loss.
Due to the aforementioned characteristics, conditional value-
at-risk theory has the potential to be applied within several
different types of optimization problems sharing a common
objective of guarding against the unfavorable realization of
uncertain system elements. Gatica et al.167 acknowledged the
importance of going beyond expectation evaluation and explic-
itly considering risk when applying mathematical models for
Ind. Eng. Chem. Res., Vol. 49, No. 9, 2010 3999
capacity planning within the pharmaceutical industry where
clinical drug trial outcomes are stochastic in nature. Conditional
value-at-risk was used within the work of Jabr168 to formulate
a robust self-scheduling model for a power producing company
attempting to provide power bids ahead of market trends. Gotoh
and Takano169 applied conditional value-at-risk to the classic
newsvendor problem dealing with maintaining inventory for one
time period while facing uncertain demand. Tsang et al.170
utilized conditional value-at-risk theory when considering the
capacity investment problem within the vaccine industry.
Yamout et al.171 addressed the shortcomings of using sensitivity
and scenario analysis to deal with the allocation and manage-
ment of uncertain water resources by applying CVAR to the
given problem. Barbaro and Bagajewicz172,173 demonstrated that
the use of financial risk management can enhance the effective-
ness of a proposed planning formulation by explicitly taking
into account system uncertainty beyond an expectation evalu-
ation. Verderame and Floudas174 formulated an operational
planning model which explicitly takes into account demand due
date and demand amount uncertainty by means of a scenario-
based conditional value-at-risk approach that in turn utilizes a
sample average approximation developed by Wang and
Ahmed175 to ensure that the obtained solution is a valid upper
bound.
2.2.3. Integration of Planning and Scheduling. A funda-
mentally important problem within the field of integrated
planning and scheduling is the consideration of uncertainty.
When attempting to integrate the operational planning and
scheduling levels, the modeler must first determine which
uncertainties should be taken into account at the planning level
and/or scheduling level. The forms of parameter uncertainty then
need to be determined and can be classified as following
bounded, known, or unknown distributions. Having defined the
uncertainty associated with the various parameters, the appropri-
ate modeling technique should be applied to the deterministic
model under consideration. For example, two-stage stochastic
programming, parametric programming, chance constraint pro-
gramming, fuzzy programming, conditional value-at-risk ap-
proaches, and robust optimization techniques are all valid
approaches toward dealing with parameter uncertainty. Each
technique has its associated positives and negatives, and the
problem structure itself often dictates which technique is
preferable. After the uncertainty considerations have been
explicitly addressed within the planning and scheduling models,
the proposed integration framework needs to be selected. Some
form of scheduling feedback should be factored into the chosen
integration framework so as to allow for the refinement of
planning level production targets. The effective integration of
planning and scheduling is an extremely challenging problem
within the operations research community, and the explicit
consideration of multiple forms of uncertainty only further
compounds the complexity of the problem. Yet, industrial case
studies demonstrated that the integration of planning and
scheduling can have a dramatic impact on operation profitability,
and so, the field of integrated planning and scheduling under
uncertainty is composed of many challenging problems pos-
sessing both industrial and academic significance.
Petkov and Maranas103 introduced chance constraint pro-
gramming to explicitly take into account system uncertainties
such as demand within a multiperiod planning and scheduling
framework based upon a rolling horizon approach where
planning and scheduling levels are revised periodically. Wu and
Ierapetritou144 presented a hierarchical approach toward planning
and scheduling under uncertainty. The planning level model
4000 Ind. Eng. Chem. Res., Vol. 49, No. 9, 2010
takes into account parameter uncertainty through a multistage
stochastic programming approach, and the integration of plan-
ning and scheduling is accomplished by means of a rolling
framework which includes an iterative methodology that
facilitates the convergence of the planning and scheduling
results. Majozi and Zhu176 developed an iterative framework
for the integration of planning and scheduling of batch plants
which utilizes fuzzy set theory in order to model the uncertainty
associated with the various operators working within the plant.
Verderame and Floudas177 developed an integrated planning and
scheduling framework that explicitly takes into account process-
ing time uncertainty and multiple forms of demand uncertainty,
and the framework allows for the two-way interaction between
the planning and scheduling levels through a rolling horizon
approach augmented by a feedback loop.
3. Energy Planning
Optimization methods have been applied to the planning of
energy systems. Various researchers have focused on the long-
term planning of regional energy systems management using
stochastic, fuzzy, and interval-parameter programming tech-
niques that integrate uncertain information directly into the
modeling formulation.178-184 The problem is characterized by
multiple energy sources and technologies, multiple involved
sectors and processes (e.g., energy conversion and transmission),
uncertainties caused by intermittence, unreliability, fluctuation,
or imprecise information, and dynamic factors (e.g., social
issues, economics, legislation).180
Several contributions focused on incorporating uncertainties
into an existing energy planning model, MARKAL (market
allocation), which has been used in the planning of energy
systems in various regions. Kanudia and Shukla185 applied
stochastic programming into the Indian MARKAL model to deal
with uncertainties in energy demand and future carbon mitiga-
tion effort. Kanudia and Loulou186 and Fragnière and Haurie187
applied multistage stochastic programming that incorporates
multiple future scenarios and provides midcourse corrections.
The scenarios are represented in a decision tree, each of which
is assigned a relative weight. Lanloy and Fragnière188 presented
a new software tool, SETSTOCH, that links algebraic modeling
languages with stochastic programming solvers.
Krukanont and Tezuka189 addressed capacity expansion under
uncertainty in a two-stage stochastic programming for the
Japanese energy system. Uncertainties exist in end-use energy
demands, plant operating availability, and potential carbon tax
rate. Ma et al.190 developed a stochastic optimization model for
technology adoptions for sustainable development under un-
certain carbon taxes and technology development, solved using
applications of sequential quadratic programming method.
Haugen191 considered a problem for scheduling fields and pipes
for natural gas delivery under resource uncertainty and formu-
lated a two stage stochastic model. Sadeghi and Hosseini192
demonstrated the method of fuzzy linear programming for
optimization of supply energy system in Iran. Borges and
Antunes193 addressed planning under uncertainty on the national
level by developing a visual interactive approach to deal with
fuzzy multiple objective linear programming. Uncertainties in
the energy planning model due to the interactions between
different sectors are tackled.
Hybrid optimization methods have been introduced to com-
bine the strengths of different approaches in order to handle
multiple types of uncertainties in the planning of regional energy
system. Lin and Huang178 introduced interval-parameter pro-
gramming that takes into account uncertainties in the model
coefficients that have unknown probabilistic or possibilistic
distribution, expressed as intervals. Lin et al.183 developed a
hybrid interval-fuzzy two-stage stochastic model to deal with
uncertainties expressed as fuzzy membership functions, discrete
intervals, and probability distributions. The model is capable
of reflecting recourse decisions and interval-format uncertainty
related to the forecasting of demands. Guo et al.182 proposed
an inexact chance-constrained semi-infinite programming ap-
proach that deals with uncertainties in the left- and right-hand
side parameters expressed as functional intervals and probability
distribution information. The solutions of these techniques are
expressed as intervals (i.e., upper and lower bounds of the
objective value), corresponding to extreme decision schemes.
These values are analyzed to examine trade-offs between
violating constraints or environmental risks and economic
performances, reflecting decision alternatives that the system
manager can take.
Cai et al.194 integrated interval linear programming, two-stage
programming, and superiority-inferiority-based fuzzy-stochastic
programming for uncertainties expressed in probability/possi-
bilistic distributions and interval values. Cai et al.179,195
integrated interval analysis, superiority-inferiority-based fuzzy-
stochastic programming, and mixed-integer linear programming
techniques to address uncertainties related to dynamic inter-
relationships between model parameters, facility expansion
issues, and uncertainties expressed as fuzzy-random variables
and discrete intervals. In another work, Cai et al.180 integrated
interval linear programming with chance-constrained program-
ming and mixed-integer linear programming techniques to
handle uncertainties expressed as probability density functions
and interval values. The combined model facilitates dynamic
analysis such as capacity expansion planning under uncertainty.
Lin and Huang196 combined interval analysis and mixed-integer
linear programming. Li et al.197 incorporated robust program-
ming, interval analysis, and min-max regret to deal with
uncertainties expressed as discrete intervals, fuzzy sets, and
random variables. Lin and Huang198 combined mixed-integer
interval analysis and two-stage stochastic programming tech-
niques that take uncertainties as interval values and probabilistic
distributions associated with greenhouse gas (GHG) emission
reduction targets and address the dynamic nature of capacity
expansion aspects.
Cai et al.199 developed a large-scale dynamic optimization
model (UREM) to support long-term energy systems planning
in the region of Waterloo. UREM is a linear programming model
with an inexact module based on interval analysis, already used
in regional and national level across Canada. The model can
handle uncertainties expressed as intervals without known
distribution information. Cai et al.181 developed an interactive
decision support system that integrates optimization modeling,
user interaction, and visual display into a software package
(UREM-IDSS).
Energy planning for individual large energy consumers is also
considered. Mavrotas et al.200 presented a mixed integer linear
programming model, representing energy flows and discrete
energy technologies, for a hotel unit. The model comprises of
fuzzy parameters that represent uncertainties in energy costs
and fuel prices. Mavrotas et al.184 focused on the power demand
of a hospital unit and treated uncertainties through fuzzy
programming. The model is transformed into an equivalent
multiobjective model, and the Pareto optimal solution is selected
by using a min-max regret criterion.
Liu et al.201 developed an inexact model for long-term
planning coal and power management systems. The model

combines chance-constrained programming, interval linear
programming, and mixed integer linear programming to handle
uncertainties expressed in terms of probability density function
and intervals, and is also capable of facilitating dynamic analysis
of capacity expansions problems. Liu et al.202 considered
nonrenewable energy resources management under uncertainty
in a hybrid chance-constrained mixed-integer linear programming.
Svensson et al.203 presented a methodology for achieving
robust investment decisions in process integration under un-
certain future energy prices and policies. Stochastic program-
ming is combined with the identification of opportunities to
increase energy efficiency in the process to develop a framework
for making decisions in investment planning. The methodology
is applied to a pulp mill example under uncertain factors such
as electricity and biofuel prices and CO2 emission policies.204
Bagajewicz and Barbaro205 presented a two-stage stochastic
formulation with risk control for a total-site heat integration
under uncertain heating utility prices, heat exchanger cost prices,
and flow rate and inlet temperatures of each stream. Yokoyama
et al.206 considered the design and multistage expansion planning
of cogeneration plants under uncertain energy demands. This
is based on min-max regret criterion, and the model formulation
is a multilevel linear programming problem. Diwekar207 pre-
sented an algorithmic framework for process integration, design,
and planning as a multiobjective optimization problem under
uncertainty, where the uncertain parameters are expressed via
probability distributions.
4. Power Generation System Planning
The objective of power generation system planning is to
ensure the provision of a reliable supply of power to the
consumers at the lowest possible cost. The planner needs to
define a series of economical and reliable expansion plans (i.e.,
when and where to build what kind of lines) to accommodate
the expected load growth over the planning period.208,209 The
complexity of the deterministic model is due to multiple choices
of station locations, multiple choices of primary and secondary
routes, multistage investment decisions, complex objectives, and
uncertainty about demand behavior, investment costs, and
equipment availability.210,211 A reliable plan is measured by its
vulnerability to the uncertain events such as fuel supply
disruptions and unanticipated load growth that leads to discrep-
ancy between power supply and demand.212 This reliability
constraint is typically met by providing an adequate margin of
plant over load, considering load forecast error, plant avail-
abilities, and weather variability.213,212 The lowest cost solution
requires the determination of the proportion of the various plant
types and their fuels which should be employed to provide the
given plant capacity and how these proportions should vary in
time. The outputs of the strategic resource planning model are
optimal values of the following decision variables: total generat-
ing capacity added in each year including storage, generating
mix by year, coal conversions by year, fuel stockpile sizes to
be maintained each year, intertia capacity to be added each year,
amount of any other supply side investments considered (e.g.,
solar technologies), load management, and power shortfall in
each state.
Uncertainties exist in the system model itself and the
unpredictable demand of electricity. Power generation system
planning is a composite of varying performance of many plants
over many years in supplying a commodity with high fluctua-
tions of demand.214,215 Sources of uncertainty include future
load forecasts, plant costs, availabilities of new plants, cost and
availability of alternative fuels, governmental policy, environ-
Ind. Eng. Chem. Res., Vol. 49, No. 9, 2010 4001
mental changes, demand growth, fuel cost, and delay in project
completion.216
When partial information about the uncertain parameters is
available, the approach taken is based on scenario representation.
The stochastic characteristics of load demand and investment
costs are represented as a set of weighted scenarios where each
scenario is a sequence of possibilities for the multistage horizon.
Shrestha et al.217 addressed price uncertainty in short-term power
generation planning. To represent market price behavior, the
next day electricity price is assumed to follow log-normal
distribution and the random price behavior conforming to this
distribution is generated using Monte Carlo technique for the
given values of mean and variance. Carvalho et al.218 addressed
the problem of distribution network expansion planning under
uncertainty using an evolutionary algorithmic procedure by
successive adjustments to the scenario structure. Carvalho et
al.211 developed a hedging algorithm to deal with scenario
representation of uncertainty in the evolutionary optimization
approach. This approach modifies the objective of the planning
problem from determining the whole investment schedule to
finding the best first-stage investments that minimize the
expected future and actual costs.
Carpinelli et al.219 addressed the embedded generation
problem (connecting generation to distribution systems) based
on a genetic algorithm and decision theory approaches. Uncer-
tainties due to disturbances caused by the embedded generation
system and existence of renewable sources are represented by
a set of possible scenarios. For each scenario, optimal sizing
and location is obtained, and decision theory is applied to choose
among possible alternatives. Rodriguez et al.220 considered
multiobjective planning under uncertainty for distributed energy
resources planning and addressed it via genetic algorithms. Reis
et al.221 addressed the reinforcement scheduling problem in
transmission power systems planning. They represented uncer-
tainty via load/generation scenarios and proposed the use of
Gaussian search techniques to solve the scenario-based deter-
ministic subproblems. The progressive hedging algorithm
(PHA), which is a scenario aggregation technique, is used to
obtain decision convergence by enforcing the subproblems to
yield the same first stage decisions. Another scenario aggregation
technique is introduced by Deladreue et al.222 who studied
cluster analysis to sort large databases when many uncertain
factors are taken into account, so that the number of simulations
is reduced. Further, a decision analysis approach can be used
to handle uncertainties in combination with various transmission
planning tools, (e.g., after scenario simulations are com-
pleted).223 The contribution of this approach is the quantification
and the minimization of risk by addressing questions of regret
in choosing a particular plan and if a future that is adverse for
that plan occurs.
Another approach to study the effect of uncertain parameters
on the obtained solutions is via sensitivity analysis. Wang and
Liao224 used this approach to address uncertainties in long-term
nuclear energy decisions. Hashim et al.225 studied the effect of
uncertainties on the optimal solution in a CO2 emission reduction
problem from a power grid that consists of various generating
plants. The varied uncertain parameters include natural gas
prices, coal prices, and retrofit costs. Elkamel et al.226 formulated
a fleetwide model for energy planning (i.e., an energy system
with multiple sources) to meet a CO2 reduction target while
maintaining or enhancing power to the grid. Sensitivity analysis
is done by changing fuel prices, retrofit cost, new plant capital
investment, and studying their impacts on the structure of the
power generating fleet.
4002 Ind. Eng. Chem. Res., Vol. 49, No. 9, 2010
Optimization based approaches can incorporate uncertainties
explicitly into the planning models. The following studies used
probabilistic simulation as a method of treating uncertainties.
Booth213 considered long-term generation planning under
uncertainty using probabilistic simulation methods for produc-
tion costing and a dynamic programming formulation. The
procedure combines the system reliability constraint with the
determination of production cost in a fast algorithm, capable
of calculating the optimal expansion plan. The method aims at
providing an optimal pattern of expansion that treats uncertainty
in a rational manner by employing dynamic programming that
provides background information on the likely optimal develop-
ment of a system of generating plants. Evans et al.215 considered
multiobjective optimization for long-range energy generation
planning under uncertainty using dynamic programing. Uncer-
tainties are represented via a discrete probability distribution
over a set of scenarios. Yasuda et al.227 studied uncertainties in
power demand for the power system expansion problem. Lucas
and Papaconstantinou214 used probabilistic simulation to address
the interaction between supply and demand uncertainties, and
to incorporate social cost of power outages into the objective
function.
Wu et al.208 studied load uncertainty in the minimum load
cutting problem. Load uncertainty is generally expressed via a
probabilistic model or an interval model where the only
information available is the upper and lower limits of the value.
The upper limit is an important index that represents the safety
degree of the system under interval load. The uncertainty is
expressed via an interval representation, leading to a bilevel
linear programming model and resulting in a minimum load
cutting number that is also expressed in interval form. Silva et
al.228 developed two mathematical models for transmission
network expansion planning problems under demand uncertainty
represented by an interval. While the first model considered the
uncertainty in the total demand of the power system, the second
one analyzed the uncertainty in each load bus individually. A
specialized genetic algorithm was proposed to solve their
models. Deladreue et al.229 used statistical methods to account
for transmission planning uncertainties such as localization of
new independent power producers and new eligible customers
and level of international exchanges.
Sanghvi et al.212 analyzed a complex problem involving the
evaluation of the cost effectiveness of alternate resource plans
that provide an adequate level of peak and strategic reliability.
It is based on a linear optimization model that selects power
system generation expansion strategies that are cost-effective
with the appropriate level of strategic and peak reliabilities.
Sherali et al.230 introduced under uncertainty, formulated it as
an equivalent deterministic LP, and applied an approach based
on a two-stage linear program with recourse to characterize the
equipment selection and marginal capital cost allocation based
on an optimal capacity plan.
Sharaf and Berg209 used a quantitative reliability technique
in conjunction with a stochastic load flow formulation to
accommodate uncertainty in system component availability and
demand projections (static optimization problem in long-range
transmission capacity expansion planning). They solved it using
chance-constrained programming, on the basis that statistical
information from the past can be used to represent the
knowledge on the uncertain factors (either expected mean is
estimated with ranges of deviation or set of values is predicted
with associate probability level) for the probabilistic constraints.
They accounted for the uncertainties in load projections in
addition to those in the network topology. Tsamasphyrou et al.231
considered the static form of long-term transmission expansion
planning in a stochastic mixed integer model and solved it with
Benders decomposition. Berg and Sharaf232 presented a dynamic
optimization problem in long-range transmission capacity
expansion planning by employing an iterative procedure to the
static optimization technique. The static optimization technique
was applied sequentially for every stage of the planning period.
Gorenstin et al.216 described a method for expansion planning
that uses stochastic optimization techniques, decision analysis,
and multiobjective trade-off analysis. The stochastic approach
is extended to reflect investment decisions that are dependent
on the previous values of parameters, leading to a multistage
mixed integer programming problem. Shiina and Birge’s233
approach is also based on integer programming and stochastic
programming. A multistage stochastic programming model is
developed where some variables are restricted to integer values.
Utilizing the block separable recourse property of the model,
the problem is transformed into a two-stage stochastic program
with recourse. Ahmed et al.234 modeled demand and cost
parameter uncertainties in a multistage stochastic integer
programming as a multilayered scenario tree, and the optimiza-
tion problem consists of determining an expansion schedule that
hedges against this scenario tree. Kaleta et al.235 addressed a
self-scheduling method for the thermal units on the energy
market where uncertainties on energy prices are modeled by a
set of possible scenarios with assigned probabilities.
Marı́n and Salmerón236 presented a stochastic model for
capacity expansion planning under capacity deterioration and
demand uncertainty. The model combines techniques of sto-
chastic optimization, robust optimization, and statistical decision
rules. Demand uncertainty is treated by creating a risk-based
function as part of the model’s objective function. Heinrich et
al.237 implemented stochastic programming models with re-
course that consider multiple objectives and system flexibility
to demand uncertainty for the expansion problem. Sarić et al.238
presented a two-stage stochastic programming model that
incorporates contingencies in developing a generation plan. Roh
et al.239 studied the stochastic coordination of long-term
generation and transmission expansion planning model in a
competitive electricity market, using Monte Carlo simulation
and scenario reduction techniques to simulate demand growth
uncertainties and random outages of generating units and
transmission lines.
Mo et al.240 addressed uncertainties such as energy demand
and prices of energy carriers along with the dynamics of the
system in power generation expansion problems. Uncertainties
are modeled as event trees, and the formulation takes the form
of a multistage problem with recourse. Fujii and Akimoto241
presented a method for power system planning under uncertain
CO2 emission control policies based on the stochastic dynamic
optimization technique. The probability distribution of uncertain
factors is determined dynamically through a policy decision
model based on a time-varying Markov process. The problem
formulation takes the form of a multistage linear programming
problem.
When probabilistic distribution is unavailable, another viable
method to solve planning problems under uncertainty is fuzzy
programming. Dimitrovski and Tomsovic242 modeled uncertain-
ties associated with risk with fuzzy set theory in load flow.
Cheng et al.243 presented a method of power network planning
under uncertainty which is based on the concept of unascertained
number. Canha et al.244 presented approaches regarding the use
of fuzzy sets to represent various forms of uncertainty in
optimization problems and applied the methods to solve power

245
engineering problems. Khodr et al. considered the distributed
generation network planning problem under uncertainty and
formulated it as a multistage fuzzy multicriteria nonlinear
problem. Sources of uncertainties include load demand and
power injections of distributed resources, which are represented
by fuzzy set numbers. Liu et al.246 developed a hybrid model
for the expansion planning of power generation under uncer-
tainty. It addresses system uncertainties in diverse forms by
integrating fuzzy probabilistic and joint probabilistic program-
ming into a mixed-integer programming framework. The
solution reflects the trade-off between system cost and system
stability through examining the risk of violating system con-
straints under uncertainty.
As power generating systems that utilize renewable sources
of energy (e.g., wind power systems, hydrogeneration systems,
etc.) increase in number in response to concerns regarding GHG
emissions, the planning problem of these systems become
increasingly relevant. Its importance is compounded due to the
intermittent nature of the energy sources. As nature changes in
a short time scale, the planning problems for the operation of
these systems span from short-term or scheduling problems to
long-term planning problems, where the time scales considered
span from a day to a year.
Zhao et al.247 combined optimization methods and a proba-
bilistic analysis to find the maximum capacity of a future wind
farm subject to the limits of the grid system (e.g., voltage
stability limits, thermal limits, voltage limits, etc.). The uncer-
tainty of wind energy is represented in a probability distribution
of wind power. Tuohy et al.248 took the uncertain nature of wind
into account in the scheduling problem. A scenario tree tool is
used and a scheduling model is formulated as a stochastic
optimization problem.
Nembou and Murtagh249 applied a stochastic optimization
model to a hydrothermal electricity generation planning problem
in Papua New Guinea. The model accounts explicitly for the
uncertain seasonal water inflow and reservoir storage, as well
as electricity demand using chance-constrained programming.
Escudero et al.250 presented a modeling framework for medium
and long-term planning problems under uncertain water inflows
and outflows based on scenario analysis. González251 considered
the long-term hydrogeneration planning in which the uncertain
flows are represented as random variables with probability
parameters.
Cabero et al.252 presented a methodology to manage market
risk for hydrothermal generation companies. Uncertainties in
the problem come from fuel prices, power demand, water
inflows, and electricity prices, which are represented in a
scenario tree, and the resulting model is a multistage stochastic
linear programming model. The authors also used conditional
value-at-risk as measures of risk exposure. Nolde et al.253
formulated a multistage stochastic programming model for
monthly production planning of a hydrothermal system where
stochasticity in water reservoir inflows and electric energy
demand are explicitly considered. Fleten and Kristoffersen254
studied the scheduling problem for the short-term production
plan of a hydropower plant using multistage mixed-integer linear
stochastic programming, assuming that the probability informa-
tion of uncertain data is available. The uncertainties considered
include the day-ahead market prices, due to the bidding into
the power exchange that needs to be done a day in advance,
and reservoir inflows.
Ind. Eng. Chem. Res., Vol. 49, No. 9, 2010 4003
5. Farm Planning
The objective of planning problems on the farm level is to
maximize the gross margin subject to constraints that define
the environment within which choices are made (e.g., labor
requirements, land available, working capital requirements).
Decision variables include the determination of the optimum
cropping pattern, the interdependence of parts of the farm, and
the optimal sizes or different types of fixed equipment and
machines to add to farm resources. At the regional level, the
objective function may change to incorporate the maximization
of social welfare. The uncertainties that farm planners face
include income variation with weather conditions, market price
changes, and crop and animal diseases. Methods that aim at
addressing agricultural uncertainties are described in this section.
Game theory based models can be used to find a pure or
mixed strategy that optimizes the decision maker’s aspirations
according to a certain behavioral criterion (e.g., maximizing the
minimum outcome, minimizing the largest regret, or maximizing
the minimum benefit). These methods are a means of analyzing
agricultural decisions under uncertainty. McInerney255 ap-
proached farm planning using a min-max linear programming
from game theory, securing a higher minimum level of return
for the farmer. Tadros and Casler256 used the game theory
approach to address uncertainties in nature. A linear program-
ming problem is solved for each state of nature to give the
optimal strategy, and a matrix is constructed to record the
payoffs of that specific farm plan for both the expected and
unexpected states of nature. Pure or mixed strategies are
determined according to the farmer’s decision criteria. Hazell257
reviewed the strengths and weaknesses of game theory and
variance minimization approaches taking the form of quadratic
programming problems for farm planning and reconstructed a
parametric linear programming that combines the desirable
features of the two approaches. Game theory requires that all
possible states are known without taking into account the
probability of occurrences. The minimization of system variance
approaches could generate a series of farm plans for different
levels of expected total gross margin. The new game theory
based models incorporate min-max and regret decision criteria
that combine the desirable features by assuming a forecast state
and using past states as a measure of risk for the forecast period.
Hazell258 noted that uncertainties in activity costs, yields, and
prices affecting the objective function can be taken into account
through the minimization of system variance yielding a quadratic
programming problem. However, these quadratic programming
problems require knowing a priori the mean gross margin,
variance, and covariance for each activity, which may prove to
be impractical for complex farm businesses. A linear alternative
to the quadratic programming referred to as the minimization
of total absolute deviations (MOTAD) model was developed,
in which the sample variance is replaced by the sample mean
absolute income deviation. Hazell259,260 maintained that the
model can also perform well in non-normal sample distributions,
such as symmetric distributions. Collender261 developed a
statistical testing method to examine the effect of estimation
risk on the ability to distinguish the mean-variance character-
istics of different portfolios when parameters are unknown.
Methods to construct mean-variance confidence regions around
estimated points were developed. Maruyama262 formulated a
linear programming model for farm planning that incorporates
uncertainty in functional, restraint, and input-output coef-
ficients, assuming that they take on a finite number of possible
values with associated discrete probability distributions. Para-
4004 Ind. Eng. Chem. Res., Vol. 49, No. 9, 2010
metric linear programming can be used to obtain solutions for
the truncated min-max problem.
Stochastic approaches have also been developed for farm
planning. Musshoff and Hirschauer263 used bounded recursive
stochastic simulation that consists of a dynamic programming
approach and Monte Carlo simulation to treat the stochastic
variables. Lien and Hardaker264 developed a two-stage stochastic
programming model with concave form of the utility function
that has constant relative risk aversion. A negative exponential
utility function is also considered that exhibits constant absolute
risk aversion. Itoh et al.265 formulated a stochastic linear
programming model for the crop planning problem of maximiz-
ing the minimum total gain. The uncertainties in the profit
coefficients are treated by introducing probabilities in the
problem formulation. Torkamani266 studied the whole-farm
planning considering using stochastic programming that can
handle uncertainties in the coefficients of both the objective
function and constraints. Rodrı́guez et al.267 studied the medium-
term planning of sow farms producing piglets with a two-stage
stochastic linear programming model with recourse. Uncertain-
ties are introduced through a finite set of scenarios in the model
formulation.
A robust optimization approach was introduced recently to
treat uncertainties in agriculture. Bohle et al.268 used this method
to deal with uncertainties when probabilistic knowledge is
incomplete. They studied the scheduling of wine grape harvest-
ing within the optimization framework that helps schedule
harvesting operations in a vineyard and assigning labor to
operations.
6. Forest Planning
Forest planning aims at finding an optimal allocation of the
available land resources to a number of management options.
This allocation problem is also called harvest scheduling and
can be solved using a linear program. Traditionally, the emphasis
of the forest planning problem has been on the production of
goods and services (i.e., timber production) that follows the
agricultural model. Decision making in forest management
ranges from short-term operational planning to strategic, long-
term planning that could involve time horizons up to several
decades.269,11 Long range decisions include yield strategies to
obtain sustainable yields at the aggregate level in terms of land
specification and timber products. Tactical or medium range
decisions cover time horizons from one harvest to the next with
a more detailed spatial resolution of the forest. Included in this
plan is road construction for accessing the timber and transport-
ing timber products from the forest. The operational or short-
range decisions determine which areas to harvest each week
and how to cut up stems into logs of defined quality, length,
and diameter to meet demand, as well as locating harvesting
machinery to carry felled trees to roads and the required
transportation.11
As awareness increases regarding the need to preserve forest
ecosystems, the focus of forest planning has shifted to also
consider forest health, biodiversity, protection of threatened and
endangered species, and scenic beauty, along with the forest’s
productivity. This ecosystem model also addresses the question
of which areas to leave unharvested to protect wildlife habitat.9,270
Long-term planning will have to depend on various projec-
tions and forecasts that are difficult to address. Accounting for
uncertainties is crucial in order to avoid harmful decisions. The
uncertainties that forest planners face include future timber
market (changing timber prices), forest productivity (timber
growth, yield projections), dynamics of the forest itself and
possible natural disturbances or catastrophic events (e.g., forest
fires, wind storms, insect infestations), technological change,
and changing environmental regulations and social objectives.
Prior knowledge and experience can provide statistical data on
some uncertainties.
Several approaches have been developed to address uncer-
tainties in the forest planning problem. Generally, uncertainties
can be accounted for by testing the robustness of the model
through sensitivity analysis or parametric linear programming,
or by handling them explicitly in the problem formulation. The
latter approach includes probability based models, fuzzy models,
and robust optimization methods.
Nelson10 noted that progress in forest planning has advanced
from small, spatial supply models with simple habitat constraints
to large, multiobjective forest-level models that include land-
scape pattern and structure. Nelson highlighted the need of
sensitivity analysis that explores how changes in individual data
or key parameters modify the optimal solution. In general,
sensitivity analysis and parametric linear programming have not
been used extensively in the field due to the wide range of values
that needs to be explored in large-scale forestry problems.269
There are many forest planning models that explicitly
incorporate uncertainty using probabilistic-based methods, such
as probabilistic dynamic programming, stochastic programming,
portfolio theory, chance-constrained linear programming, sce-
nario analysis, Markov decision models, and optimal control
theory.271 Probabilistic or stochastic models are based on the
assumption that the uncertainty inherent in a system can be
captured by defining the probability distribution that the random
variables of interest follow. Boyland et al.271 combined scenario
analysis and a simulation approach with deterministic optimiza-
tion techniques where uncertain coefficients are randomly
generated and optimal solutions for a set of scenarios are found.
The main question was how to project sustainable harvest
volumes while maintaining social and ecological objectives.
Forboseh and Pickens272 presented a harvest scheduling problem
with stochastic stumpage prices, where demand constraints on
the periodic yield of some products exist over a long planning
horizon. The underlying price uncertainty is modeled as a
stationary process with normally distributed deviations. Boychuk
and Martell273 addressed the risk of fire in forest planning using
a multistage stochastic model. Eriksson274 extended a model
formulation to incorporate uncertainty as a program with
recourse, taking into account that the decision maker is able to
observe the state of the system over time and subsequently make
adaptations. The stochastic process is treated as a collection of
scenarios.
Probabilistic programming is appropriate for types of prob-
lems where uncertainty is mainly due to randomness. However,
for other factors such as imprecision, ambiguity, inexactness,
and inaccuracies, where the probability distribution is not always
available, another approach is needed. Fuzzy models are based
on the assumption that the uncertainties can be represented by
treating certain model parameters as fuzzy numbers or fuzzy
relationshipssimplying vagueness or ambiguity. Fuzzy coef-
ficients are usually represented as an interval instead of a single
number and constraints are referred to as fuzzy or soft if they
do not have to be strictly satisfied. Mendoza et al.269 applied
fuzzy multiple objective linear programming in forest planning
where objective function coefficients are uncertain. The uncer-
tain coefficients are represented by interval values, the problem
is reformulated as a min-max problem utilizing linear member-
ship functions, and it is extended for uncertainties in the
constraints.

A different approach to address uncertainty is through robust
optimization, and it was used in a recent study by Palma and
Nelson.275 The authors introduced a robust optimization meth-
odology128 to handle uncertainties in timber yield and demand
of two products. Since robust optimization maintains the
linearity of the original problem in the reformulation, the
resulting model is computationally tractable. This method
assumes that uncertain data are uniform and independently
distributed within a symmetrical range of values.
7. Waste Management
Municipal solid waste (MSW) management has received
considerable attention during the last decades because solid
waste has produced serious effects on the environment, eco-
systems, and human health.276,277 The main challenge is the
enormous economic cost of cleaning up pollution from solid
waste and transporting waste from cities to treatment facilities
and the operation of treatment facilities. However, many system
parameters such as waste-generation rates and waste-treatment
costs may be uncertain.278-280 Several optimization models and
methods were developed to address the waste-management
planning problem to minimize the associated treatment costs.
Mostofthemarebasedonintervalanalysis,281-283 stochastic,284-288
chance-constrained,289 and fuzzy290 approaches. Uncertainties
are represented by stochastic, fuzzy membership, and intervals.
Huang et al.282 applied an integer programming method for the
facility expansion planning under uncertainty for water manage-
ment planning problem. The uncertain inputs are treated as
intervals. Guo et al.288 combined stochastic programming,
integer programming, and interval semi-infinite programming
approach for solid waste management under uncertainty where
uncertain left-hand-side parameters are expressed as intervals
and right-hand sides parameters are represented by intervals and
probability distributions.
To address the uncertainties represented by probability
distributions in both the left-hand-side and right-hand-side
coefficients of the constraints, robust optimization models291,292
were proposed. Cai et al.293 proposed an interval-valued robust
programming approach incorporating multiple uncertainties.
Chakraborty and Linninger294 extended their planning
method295 to optimize operating procedures in the presence of
uncertainty in the effluent stream represented by scenarios with
a fixed-plant inventory. Chakraborty et al.296,297 addressed the
same problem with variable plant inventory. List et al.298
developed a two-stage stochastic robust optimization model for
the transportation planning problem of radioactive wastes from
remediation sites to disposal sites under uncertainty which
includes the total quantity of waste, processing rates at the
remediation sites, and certification of packages. All uncertainties
were represented by scenarios with known probability of
occurrence, while the objective was to determine the equipment
acquisition strategy and fleet planning including financial and
political risks.
8. Water Resources Management
With climate change and increasing demands for freshwater
by expanding global population, the need for wise use of
freshwater and the improvement of current water management
have become of increasing importance. Integrated water re-
sources management involves many applications such as catch-
ment management, groundwater management, water supply
planning, and water quality management.299 The decision
making process is generally complex and involves a wealth of
data, scenarios, models, alternatives, decision makers, and
Ind. Eng. Chem. Res., Vol. 49, No. 9, 2010 4005
stakeholders with conflicting interests. More importantly, deci-
sion making often involves noncommensurable objectives,
especially when environmental and social factors are considered.
As a result, most work focused on analysis and ranking of
different alternatives.
The cost benefit analysis framework was first developed for
water resource decision-making problems with the objective of
maximizing the ratio of benefits to costs. The approach used
an economic index such as the total revenue, benefit/cost ratio,
or rate of return to compare different decision alternatives.
Uncertainties were included into the objective by incorporating
the expected cost of failure. Then, the uncertainty of each
alternative can be included into the objective function using
the risk of failure. As a result, the risk-cost-benefit objective
function was developed. The advantages of the cost-benefit-
analysis framework are its simplicity, flexibility, treating
uncertainties, and explaining the results in financial forms.300
However, the cost benefit analysis framework does not represent
the failure cost properly because postfailure consequences are
inherently difficulty to forecast. Moreover, litigation costs,
regulatory penalties, loss of opportunity or investment, and
damage to public relations are also hard to quantify or predict.
Therefore, decisions using a cost benefit analysis framework
are highly sensitive to the failure cost.301,302
An alternative approach named multicriteria decision analysis
(MCDA) is widely used for water resource planning since it
provides a framework to deal with noncommensurable aspects
and to facilitate stakeholder’s involvement for collaborative
decision-making.303 A comprehensive review on MCDA meth-
ods such as linear multiobjective programming, goal program-
ming, compromising programming, composite programming,
and multiattribute utility theory can be found in the work of
Zopounidis and Doumpos.304 The MCDA methods are widely
used in water resources management without considering
uncertainty.305,299 However, uncertainties often occur because
of data unavailability, variability, and knowledge deficiency.
Moreover, the ever-changing environmental factors such as
climate and land use may also increase the uncertainty.
Applications of uncertainty and sensitivity analysis in real-world
water resource decision making are rarely found in the literature
or in practice.306,305 Several approaches such as sensitivity
analysis methods, stochastic uncertainty analysis, distance-based
uncertainty analysis, and fuzzy-based approaches are incorpo-
rated into the MCDA framework for water resources planning.
Fuzzy-based approaches have received extensive attention
because of their flexibility in addressing imprecise subjective
data. Uncertain basic indicator values for evaluating and ranking
alternatives for water resources planning problems are repre-
sented by fuzzy numbers. Lee et al.307 developed a risk
management method for nitrate-contaminated groundwater
supplies using fuzzy set approach to represent some uncertain
basic indicator values such as Methemoglobinemia, nitrate level,
and cancer. They used an MCDA method to evaluate and rank
various nitrate risk-management strategies. Lee et al.308 em-
ployed the same approach to evaluate and rank various water
supply lines. Uncertain basic indicator values such as velocity
of flow, pressure in node, and difficulty of maintenance were
represented by fuzzy numbers. Raj and Kumar309,310 used
maximizing and minimizing set concepts of fuzzy logic to select
the best reservoir configuration for the Krishna River basin in
India. The experts’ opinion is represented with fuzzy numbers.
Bender and Simonovic311 incorporated the application of fuzzy
sets to compromise programming to address water resource
systems planning under uncertainty where criteria values and
4006 Ind. Eng. Chem. Res., Vol. 49, No. 9, 2010
weights are expressed with fuzzy sets. Other works for water
resources planning using fuzzy sets can be found in the work
of Raju and Kumar,312 Yin et al.,313 Chang et al.,314 Chang et
al.,315 Chang et al.,316 and Vamvakeridou-Lyroudia et al.317
Hyde et al.318 proposed a reliability-based approach to MCDA
for criteria weights and performance values uncertainties where
a continuous probability distribution such as uniform, normal,
or logistic is used for uncertain criteria weights and quantitative
performance values and a discrete uniform distribution is used
for qualitative performance values. They also considered the
correlations between criteria weights. However, this reliability-
based approach requires appropriate probability distributions for
the criteria weights that may be difficult in some situations with
insufficient data. To overcome the disadvantages found by Hyde
et al.,318 Hyde et al.303 proposed a distance-based analysis
approach with MCDA to address only criteria weights uncer-
tainty. They first used deterministic MCDA to identify the total
value of each alternative. Then they determined the minimum
modification of the criteria weights that is required to alter the
total values of two selected alternatives such that rank equiva-
lence occurs with the lower and upper limits for criteria weights
by solving another optimization problem. The proposed ap-
proach was used to address the water resource planning problem
from Raju et al.319 and Duckstein et al.320 Escudero321 developed
a multiperiod scenario-based model for water resources planning
under hydrological exogenous inflow and demand uncertainties.
They used augmented Lagrangian decomposition methods to
solve their model.
9. Transportation Planning
Transportation systems use fleets of vehicles to carry people
or goods from origins to destinations. The main transportation
modes include road, rail, maritime, and air. The main trans-
portation problems are fleet sizing and vehicle routing and
scheduling. In this section, we discuss about transportation
planning under uncertainties.
The capacity of a transportation system involves the number
of available vehicles. Since vehicles are costly capital items,
determining the optimal number of vehicles, their utilization,
and empty vehicle allocation (i.e., fleet sizing) for a transporta-
tion system to meet customer demands is quite important. Fleet
sizing involves shipments carried, loaded vehicle flows across
the network, and vehicle fleet size(s) to optimize service quality,
cost, profit, etc.322 Fleet sizing is related with many areas such
as overall service design,323 trucking,324-326 airline express
package service,327 and material handling systems used for
manufacturing operations.328,329
Uncertainties in fleet sizing mainly come from demands and
operating conditions. However, it is often quite difficult to
address the models of the fleet sizing problem even under
nominal conditions and relatively little work has been proposed
for fleet sizing problems under uncertainty. Contributions
involve vehicle movement decisions for stochastic freight flow
patterns,330 vehicle allocation decisions under demand uncerta-
inty,331-336 fleet sizing decisions under uncertain travel and
service times,337 and integrated fleet sizing and empty equipment
allocation decisions under demand uncertainty.338-340 List et
al.322 developed a two-stage stochastic model for fleet sizing
under uncertainty in demands and operating conditions. The
uncertainties were represented with a normal distribution, and
a stochastic decomposition procedure was proposed to solve
their model. Song and Earl339 addressed the empty vehicle
repositioning and the fleet sizing problem under uncertainty from
loaded vehicle arrival times at depots and repositioning times
for empty vehicles. Dong and Song340 addressed the container
fleet sizing and the empty container repositioning problem
simultaneously under customer demand uncertainty where the
uncertain demands are represented by uniform and normal
distributions. A simulation-based evolutionary optimization
algorithm was developed to find the optimal container fleet size
and determine the policies of empty container repositioning.
Sayarshad and Tavakkoli-Moghaddam341 developed a two-stage
stochastic programming model for optimizing rail-car fleet size
and freight car allocation under demand uncertainty. The
demand uncertainty is represented assuming a probability
distribution, and the model was solved using a simulated
annealing approach. Dejax and Crainic342 presented a compre-
hensive review of research on fleet sizing issues.
The vehicle routing and scheduling problem is another
important transportation problem. The objective is to determine
optimal routes and timetables for given fleet size of vehicles
while minimizing the total operating cost or maximizing the
total profit. A detailed survey on deterministic routing and
scheduling models can be found in the papers of Cordeau et
al.,12 Ronen,343,344 and Christiansen et al.345 Common uncer-
tainties for vehicle routing and scheduling are stochastic
demands and travel times. Sometimes, the set of customers to
be visited is not known with certainty. Stochastic vehicle routing
and scheduling problems are often regarded as computationally
intractable since they combine the characteristics of stochastic
and integer programming. Stochastic vehicle routing problems
are usually modeled as mixed or pure integer stochastic
programs or as Markov decision processes.13 Most of them are
modeled as chance-constrained stochastic programming346-349
and stochastic programming with recourse.350-352 All these
models are transformed into equivalent variants and solved with
exact algorithms such as the integer L-shaped method,350,353,351
exploiting particular data structures,354 dynamic algorithm,355
and heuristics.356,347,357 Isleyen and Baywoc349 developed an
efficiently model for the vehicle routing problem under demand
uncertainty. Uncertainty demand was derived from a continuous
probability distribution such as the uniform distribution. They
used Monte Carlo simulation to test the accuracy of their model.
A detailed review on stochastic vehicle routing can be found
in the paper of Gendreau et al.13
Tang and Yan358 proposed a routing and scheduling frame-
work for intercity bus carriers under stochastic travel times and
demand. Christiansen and Fagerholt359 presented a robust ship-
scheduling problem with multiple time windows under ship
arrival delay and stochastic service times. Another transportation
problem is related with evacuation management. Yao et al.360
developed a robust linear programming model to provide a
framework for evacuation management planning problem in
large-scale network under demand uncertainty.
The vehicle routing problem combining inventory manage-
ment denoted as the inventory routing problem has also been
considered in the literature. Uncertainties in the inventory routing
problems mainly arise from customer demands. A large number
of stochastic models based upon dynamic programming or
Markov decision processes have been developed for this
problem under demand uncertainty. Kleywegt et al.14,15 clas-
sified these models and presented comprehensive surveys.
Kleywegt et al.14 formulated an inventory routing problem under
demand uncertainty as a Markov decision process. They
assumed one delivery per trip. To solve their model, they
developed an approximation method in which they decomposed
the overall problem into subproblems and used the results of
the subproblems to approximate the optimal value function.

15
Kleywegt et al. extended both the formulation and solution
approach of Kleywegt et al.14 to deal with multiple deliveries
per trip. Hvattum and Lokketangen361 modeled the inventory
routing problem with uncertain customer demands as a Markov
decision problem. They examined the progressive hedging
algorithm for solving the scenario tree based subproblems.
The airline planning process is typically decomposed into four
subproblems: schedule generation, fleet assignment, maintenance
routing, and crew scheduling.16 The objective of schedule
generation is to determine origin-destination itineraries, frequen-
cies, and times to fly in a given period of time. The fleet
assignment problem determines which type of aircraft should
be assigned to each flight. The maintenance routing problem is
a feasibility problem which assigns specific aircraft to flights
so as to ensure adequate opportunities for required maintenance
checks. The objective of the crew scheduling problem is to find
the most cost-effective assignment of the crew to the flights.
However, planning for the airline industry has become more
complex and dynamic.362
Airline operations are subject to significant disruptions.
Disruptions often occur because of weather conditions, un-
planned maintenance issues, safety checks, security concerns,
and more. Inefficient schedules can become very costly.16
Ahmed and Poojari16 presented a comprehensive review on
airline planning under uncertainties. The goal of robust planning
is to generate schedules that are less sensitive to disruptions.
Two major approaches have been proposed for robust airline
planning. They are based on a stochastic programming
model363,364 or a set of surrogate problems with stochastic
nature.365-367 While robust planning models try to avoid
disruptions proactively, recovery models368-371 seek the best
way of reacting when disruptions do occur, so as to minimize
their impact on the system and prevent propagation. Detailed
reviews on recovery models can be found in Kohl et al.372 and
Bratu and Barnhart.373
10. Other Application Sectors
Motion planning is a fundamental problem in robotics. In
motion planning with uncertainty, the objective is to find a plan
which is guaranteed to succeed even when the robot cannot
execute it perfectly due to uncertainty. While classical motion
planning traditionally assumed that there is no uncertainty in
the robot motion or sensing, recent approaches to the problem
explicitly address motion planning with uncertainty.374 Uncer-
tainty arises from sensing errors, control errors, the geometric
models of the environment of the robot, and imperfect informa-
tion on the locations of objects.
Applications arise in two main domains in part mating for
mechanical assembly, and mobile root navigation.375 Various
approaches have been proposed, which are applicable to one
domain, or the other, or both. They include skeleton refine-
ment,376 inductive learning from experiments,377 iterative
removal of contacts,378-380 and preimage backchaining.381,382
While skeleton refinement, inductive learning from experiments,
and iterative removal of contacts first generated a motion plan
assuming no uncertainty, and then transformed to deal with
uncertainty, preimage backchaining takes uncertainty into ac-
count throughout the whole planning process.
In the recent artificial intelligence literature, the uncertainties
were viewed as random variables or a stochastic process, which
led to Markov decision processes and their extensions,383,384
as well as partially observable Markov decision processes.385-392
To solve these models, various approximations techniques have
been developed, such as grid-based approaches,393-395 point-
Ind. Eng. Chem. Res., Vol. 49, No. 9, 2010 4007
387,396 397-399
based approaches, factorization-based approaches,
compression methods,400 policy search methods,401 logic of
knowledge,402 and the ARKAQ-Learning algorithm391 and
heuristic search.403 All these models are solved with the value
functions defined for the belief states404 or the information
state.405,406
Smith et al.407 addressed the problem of strategic planning
for the mining industry. Alighanbari and How408 addressed
robust planning for the task assignment problem of unmanned
aerial vehicles (UAVs) under uncertainty. Gardner and Buza-
cott409 demonstrated how a stochastic model under new technol-
ogy development uncertainty is used to generate possible
hedging strategies for this problem. Although their methods are
general, they use direct steelmaking in the iron and steel industry
to illustrate their ideas. The uncertain parameters are represented
by scenarios. Chan et al.410 used a robust approach for radiation
therapy treatment planning problem under uncertainty coming
from intrafraction breathing motion in lung tumors. Their
objective is to minimize the total (or integral or mean) dose
delivered to the phantom, while ensuring that all voxels in the
tumor receive a specified level of dose. Karabuk411 developed
a stochastic programming model for the yarn production
planning problem in textile manufacturing under demand
uncertainty, which is represented by scenarios.
11. Future Challenges and Opportunities
As markets become more competitive, companies will
continue to rely on rigorous planning and scheduling models
in order to help coordinate and schedule supply chain activities.
Optimization models taking the form of linear programming,
nonlinear programming, mixed-integer linear programming, and
mixed-integer nonlinear programming are ideal when dealing
with many different variants of planning and scheduling
problems, because the constraint set can represent the system
characteristics and the objective function can help to quantita-
tively reflect the goals of the company such as profit maximiza-
tion. The primary difficulty within the field of planning and
scheduling under uncertainty is the formulation of mathematical
models which accurately portray the system under consideration
and at the same time can be solved within a tractable period of
time using commercially available solvers. In the area of
strategic planning, the explicit consideration of the various issues
regarding the merger and acquisition problem and the potential
synergy which can be achieved should be addressed. Yoon and
co-workers412-414 considered the merger and acquisition prob-
lem for petrochemical companies operating within the same
complex under deterministic system conditions; however, the
explicit consideration of parameter uncertainty, as well as the
extension to other industries would be a worthwhile pursuit.
Due to the considered time horizon, operational planning models
are often formulated as aggregated scheduling models where
the production capacity of the plant is approximated; however,
this modeling approach leads to the planning model potentially
overestimating the production capacity of the plant. As a result,
future work aimed at formulating planning models which
provide very tight upper bounds on the production capacity for
a variety of plants should remain a very important objective
within the planning and scheduling community. Within the last
two decades, considerable advances have been made in the area
of short-term scheduling; however, most academic contributions
have focused on validating techniques on small case studies.
In order to close the gap between idealized test systems and
real-world applications, continued work will need to be con-
ducted in adapting existing frameworks to address large-scale
4008 Ind. Eng. Chem. Res., Vol. 49, No. 9, 2010

industrial problems. For example, Janak et al.138,139 and Castro Table 1. Forms of Uncertainty
et al.415 proposed frameworks for the scheduling of large-scale, uncertainty
multiproduct batch plants, and Shaik et al.53 developed a sector forms of uncertainty distribution
medium-term scheduling approach for large-scale industrial CPPI market prices bounded
continuous plants. Taking into account the different forms of processing times known discrete
process uncertainty within these large-scale application also will demand amount and known continuous
due date
be an important direction within the scheduling community. unit capacities fuzzy sets
Supply chain activities often follow a hierarchical approach unit breakdowns unknown
(availability)
where information is supplied to one level by a preceding level. transportation time
For instance, strategic planning decisions are received by the and cost
operation planning level which in turn provides information to energy planning demand amount bounded
the scheduling level. Industrial case studies indicated that in energy prices known discrete
order order to maximize the productivity and efficiency of the technological development known continuous
capacity expansion fuzzy sets
supply chain under consideration, integration schemes which fuel prices unknown
allow for two-way communication are integral. The effective equipment prices
fluctuation in plant
integration of operational planning and scheduling can lead to operations
a dramatic reduction in missed product orders and inventory. future carbon mitigation effort
The continued development of integration frameworks aimed
power generation demand, prices bounded
at enhancing the communication between various supply chain system planning load forecasts known discrete
levels is an another important research area which warrants transmission schemes known continuous
demand locations fuzzy sets
further academic and industrial involvement. investment costs unknown
Although planning and scheduling under uncertainty has been fuel costs
network expansion
covered for many applications, there are still some research power outages
opportunities that need to be addressed in the future. Liu et al.246 capacity deterioration
noted that their development of the hybrid optimization models retrofit costs
for the expansion planning problem can be used in energy and farm planning crop prices bounded
environmental planning problems. Indeed, recently this hybrid activity costs known discrete
weather conditions known continuous
framework has been applied to energy planning problems. This onset of disease fuzzy sets
overlap indicates that the developed frameworks in the energy crop yields unknown
planning sector can also be applied to power generation systems.
forest planning demand, prices bounded
Recent works by Palma and Nelson275 and Bohle et al.268 in forest productivity known discrete
forest planning and farm planning, respectively, showed that forest dynamics known continuous
the implementation of robust optimization frameworks formerly natural disturbances fuzzy sets
catastrophic events unknown
applied in engineering problems have potential application in technological changes
these sectors. For municipal solid waster management, although environmental regulations
I-VFRP developed by Cai et al.293 is applicable to practical waste management waste generation rates bounded
problems with highly complex and uncertain data, it can be transportation cost normal
further enhanced by incorporating the methods of uncertainty operation cost fuzzy sets
waste disposal capacities
analysis. For motion planning, effective methods are still needed waste loads
to reduce computational cost and applied into real-time planning
water resources basic indicator values discrete uniform
in large-scale environments. For capacity expansion problems, management criteria values and weights continuous uniform
two-stage stochastic models could be extended to multistage to continuous normal
reduce further risks and investments. Moreover, there is great continuous logistic
potential for future contributions within the area of scheduling transportation planning demands continuous normal
under uncertainty, especially with regard to ship routing. travel and service times bounded
number of customers exponential
When modeling parameter uncertainty, two-stage stochastic to be visited
programming, parametric programming, fuzzy programming, vehicle/ship/airline uniform
arrival time
chance constraint programming, robust optimization techniques, empty vehicle repositioning
conditional value-at-risk, and other risk mitigation procedures time
freight flow
are often applied. Table 1 outlines the various forms of vehicle productivity
uncertainty present within each sector under investigation, and
Table 2 provides a breakdown of the steps undertaken within other application sensing errors known discrete
sectors control errors
each approach, as well as a list of the various sectors which object location (motion
have utilized each of the aforementioned approaches. The planning)
demand (textile
inherent downside of scenario-based two-stage stochastic pro- manufacturing)
gramming is the exponential increase in problem size due to
the increase in considered scenarios. As a result, scenario recourse decisions which are dependent upon uncertain param-
truncation/merging techniques which take advantage of problem eter realization remains. Methodologies which could facilitate
characteristics in order to reduce the number of required the removal of these nonlinearities in the expectation evaluation
scenarios would greatly enhance the applicability of scenario- along with reducing the required computational time in evaluat-
based two-stage stochastic programming. When using continu- ing the expectation would in turn address several of the
ous distributions within two-stage stochastic programming, the fundamental issues within two-stage stochastic programming.
issue of exponential model size growth is avoided, but the When utilizing both chance constraint and robust optimization
problem of evaluating the expectation term containing those techniques, potential nonlinearities can be introduced into the

Table 2. Outline of Uncertainty Approaches
Two-Stage Stochastic Programming
1. Define uncertain parameters’ distribution characteristics.
2. Decide whether to express uncertainty through continuous
distributions or scenario generation.
3. Reformulate model into a first stage deterministic and second stage
recourse.
Application Sectors: CPPI, waste management, water resources
management, transportation planning, Other application sectors, energy
planning, power generation system planning, farm planning, forest
planning
Parametric Programming
1. Define uncertain parameters’ information.
2. Apply parametric programming algorithm to determine critical
regions.
3. Requires solving subproblems in order to determine unique solutions
within critical regions.
Application Sectors: CPPI, farm planning
Fuzzy Programming
1. In the absence of distribution information, apply fuzzy set theory.
2. Treat uncertain parameters as fuzzy numbers.
3. Express constraints containing uncertain parameters as fuzzy sets.
Application Sectors: CPPI, waste management, water resources
management, energy planning, power generation system planning
Chance Constraint Programming
1. Define uncertain parameters’ distribution characteristics.
2. Express probabilistic constraints.
3. Set constraint satisfaction level.
4. Transform probabilistic constraints into deterministic form.
5. Replace uncertain constraints with derived deterministic constraints.
Application Sectors: CPPI, waste management, transportation planning,
energy planning, power generation system planning
Robust Optimization Techniques
1. Define uncertain parameters’ distribution characteristics.
2. Express probabilistic constraints.
3. Set relative uncertainty, constraint satisfaction, and constraint
relaxation levels.
4. Transform probabilistic constraints into robust counterpart constraints.
5. Augment model with deterministic robust counterpart constraints.
Application Sectors: CPPI, waste management, other application
sectors, power generation system planning, farm planning, forest
planning.
Risk Mitigation Techniques
1. Define uncertain parameters’ distribution characteristics.
2. Capture risk through appropriate loss function expression.
3. Constrain maximum level of perceived loss through confidence and
exposure levels.
Application Sectors: CPPI, power generation system planning
model if the uncertain parameters are being multiplied by system
variables, and so, the development of tight convex and concave
envelopes for these nonlinear terms would be useful when
applying both chance constraint programming and robust
optimization techniques. The primary objective when attempting
to explicitly consider parameter uncertainty is to guard against
the unfavorable realization of the uncertain parameters, and with
this objective in mind, several risk mitigation techniques used
within the financial industry may be applicable to the planning
and scheduling problems found within other industries. For
example, conditional value-at-risk theory goes beyond expecta-
tion evaluation and attempts to minimize in a rigorous way
exposure to perceived risk, and consequently, the application
of conditional value-at-risk within planning and scheduling
problems is a potentially attractive avenue for future research.
12. Conclusions
Planning and scheduling have various connotations depending
upon the sector of interest. However, mathematical modeling
and optimization based frameworks taking into account param-
eter uncertainty represent the common thread which connects
Ind. Eng. Chem. Res., Vol. 49, No. 9, 2010 4009
all of the sectors under investigation. It has been demonstrated
that two-stage stochastic programming, parametric program-
ming, fuzzy programming, chance constraint programming,
robust optimization techniques, conditional value-at-risk, and
other forms of risk mitigation approaches have the ability to
explicitly take into account parameter uncertainty within a
mathematical framework. Using these common methodologies,
a modeler can potentially address planning and scheduling
problems under uncertainty within a wide array of fields, and
the intention of this review article is to provide researchers with
a roadmap that highlights the key characteristics and future
directions for planning and scheduling under uncertainty within
a variety of fields.
Acknowledgment
The authors gratefully acknowledge financial support from
the National Science Foundation (CMMI-0856021).
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ReceiVed for reView December 18, 2009
ReVised manuscript receiVed March 10, 2010
Accepted March 25, 2010
IE902009K