Cyclical volume planning and fair share mix decisions, delivering a more robust service level

Abstract

This article investigates the ability to integrate scheduling and lot-sizing decisions within the semi-process industry. The production model corresponds with the production process of Agfa, a photographic film producer. The manufacturing model is typically semi-process, where a first stage produces a limited number of intermediate products. The second stage is flow-shop-oriented and converts the intermediates into many distinct end products. The planning approach corresponds with two-level scheduling. A tactical volume plan is established at the intermediate product level, which is then used as an input constraint for the secondary problem, determining the end-product lot sizes. These end-product mix decisions are governed by a tuned fair share algorithm. This article researches the possibilities of migrating the fair share algorithm from a distribution environment towards a capacity constrained production environment and the results are compared with the traditional model based on standard economic order quantity lot sizing. This article proposes a tuned algorithm with its parameter settings and discusses the impacts on stock values, service levels and set-up and inventory holding costs. The simulation results prove that the combination of a tactical volume plan, at the intermediate product level, combined with fair share mix decisions for the end-product lot sizes, delivers a more robust planning model. The main benefit of the model integrating volume planning and mix decisions is the ability to reduce demand amplifications, prohibiting market demand nervousness from entering into upstream operations, which allows a major reduction in needed safety stock at the intermediate product level.