Comparison between rule- and optimization-based workload control concepts: a simulation optimization approach

Abstract

An important goal of Production Planning and Control systems is to achieve short and predictable flow times, especially where high flexibility in meeting customer demand is required, while maintaining high output and due-date performance. One approach to this problem is the workload control (WLC) concept. Within WLC research two directions have been developed, largely separately, over time: Rule based and optimisation-based models. If a company intends to introduce an order release concept based on WLC it first has to decide which of these two approaches should be applied. Therefore, this paper compares two of the most widely used and considered best performing periodic order release models out of both streams: the LUMS (rule based) and the clearing function model (optimisation based). The parameters of both approaches are set using simulation optimisation. The performance is compared using a simulation study of a hypothetical job shop in a rolling horizon setting. The results show that the optimisation model outperforms the rule-based mechanism in all instances with stochastic demand (exponential inter-arrival times), but is outperformed in aggregate cost of backorders and inventory holding and balancing measures by the LUMS approach for scenarios with high utilisation and seasonal demand.