Aggregate production planning model under demand uncertainty: A case study in an Indonesian cement company

Abstract

In this paper, a multi-product, multi-stage and multi-period aggregate production-planning model is proposed to deal with demand uncertainty in an Indonesian Cement Company. The demand uncertainty is modelled as a number of discrete scenarios with known probabilities. This problem consists of determining the optimal production, subcontract and inventory level of clinker and cement in order to fulfil demand at minimum cost within the planning horizon. This research aims to develop an aggregate production-planning model under demand uncertainty in an Indonesian Cement Company. The model constructed as a linear programming problem using scenario-based approach to satisfy demand at minimum cost. The outcome of this research is the development of an aggregate production-planning model that accommodates demand uncertainty in Indonesian Cement Company by considering material balance at each stage of the process, equipment capacity and inventory storage capacity during the planning horizon. The proposed model can be used as a decision-making basis for production and inventory control manager to produce or subcontract clinker and semen in each period to fulfil demand at minimum cost.