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A simulation based cut generation approach to improve DEO efficiency: The Buffer Allocation case

The stochastic Buffer Allocation Problem (BAP) is well known in several fields and it has been characterized as NP-Hard. It deals with the optimal allocation of buffer spaces among stages of a system. Simulation Optimization is a possible way to approximately solve the problem. In particular, we refer to the Discrete Event Optimization (DEO). According to this approach, BAP simulation optimization can be modeled as a Mixed Integer Programming model. Despite the advantages deriving from having a single model for both simulation and optimization, its solution can be extremely demanding. In this work, we propose a Benders decomposition approach to efficiently solve large DEO of BAP, in which cuts are generated by simulation. Numerical experiment shows that the computation time can be significantly reduced by using this approach.