Production control in manufacturing systems with perishable products under periodic demand

Abstract

Manufacturing systems are often exposed to variable market conditions, resulting in demand variations over time. Production control in this situation is more challenging than in conventional case characterized by constant demand rate. When manufactured products are perishable, accounting for demand variations is critical for correctly determine the safety stock level. An important source of periodic demand variability are seasonal changes in market conditions, although weekly or monthly changes also need to be taken into account. These variations are critical for production control in several branches of food and pharmaceutical industry, where products are also subject to deterioration over time (perishabilty). Both demand variability and product perishability must be taken into account for production policy optimization. It is particularly important when production facility is failure-prone. The rationale here is that the conventional approach is based on setting the safety (hedging) inventory level in order to cope with potential failures leading to shortage. For perishable products, however, this approach needs to be reconsidered due to eventual deterioration of products kept in stock longer than the product shelf-life.To address the production planning problem in the context of perishable products, we have developed a 3-steps procedure, that consists of (a) determining the critical (hedging) inventory level that varies in time, adapting to demand variations, (b) determining the upper limit for the products kept in stock (perishable inventory limit), which depends on the shelf-life and demand variation pattern, thus also varies in time, and (c) showing that the perishable inventory limit constitutes an upper bound for the hedging level. The proposed production policy adapts to periodic demand variations and account for a limited product shelf-live; it is optimal and results in no perished products. By preventing over-production during the low demand rate periods, this policy allows to integrate incurred cost minimization with environmental requirements by ensuring no waste manufacturing.