Alternative approaches for reducing schedule instability in multistage manufacturing under demand uncertainty

Abstract

AbstractSchedule nervousness caused by uncertainty in demand or supply or by dynamic lot‐sizing can be an obstacle to effective execution of material requirements planning (MRP) systems. Previous studies on the effectiveness of alternative approaches for dampening nervousness almost always considered single‐level product structures and deterministic demand conditions. This study evaluates the effectiveness of three strategies for reducing nervousness in multi‐level MRP systems under demand uncertainty: (1) freezing, (2) end‐item safety stock, and (3) lot‐for‐lot scheduling below level 0. The strategies are evaluated under a wide range of operating conditions characterized by variations in item cost structure, product structure, demand uncertainty, and lot‐sizing methods used. A multi‐level MRP system is simulated to study the relative performance of the three strategies. Results indicate that freezing the master production schedule is the most effective approach in terms of reducing both instability and cost as the freeze length covers the cumulative lead time. It is also the least sensitive to changes in operating conditions.