An integrated optimization model of production plan in a large steel manufacturing company

Abstract

ABSTRACT A large steel company needs to improve its efficiency by integrating the decision making from suppliers to buyers. Therefore, an optimization model is required to determine simultaneously the optimal raw material allocation, liquid steel allocation subject to maintenance schedule, and coils allocation from Hot Strip Mill (HSM) to five sub divisions under HSM. The model is aimed at maximizing total profit with several constraints such as production capacity at each sub division, maintenance cost, and inventory balance. We use the operation research methodology to solve the problem, start with problem definition, model development, find optimal solution, and sensitivity analysis. The model was solved using the Oracle Crystal Ball software. Sensitivity analysis results show that the objective function is sensitive to the changes of maintenance cost, raw material price, and product selling price. The allocation of coil, liquid steel, and the amount of raw material orders are sensitive to the maintenance cost and product selling price.