The effect of correlated demand on the cyclical scheduling system

Abstract

This paper investigates the effect of correlated demand on the cyclical scheduling system. The paper first analytically demonstrates that a blend-to-order production environment will generally realize correlated demand for blending components, even if the demands for finished blends are mutually independent. The degree of component demand correlation is shown to depend on the nature of the recipes used to blend finished products. A simulation model is then used to investigate the effects of this correlation, for the case of blending components produced on a single process under a cyclical scheduling policy. The results demonstrate that component demand correlation increases the variance of the production cycle length, and induces correlation between the cycle length and demand per period within the cycle. Both effects contribute to an increase in the variability of total demand during the production cycle, thus increasing the requirement of safety stock for the blending components. In the environment under concern, an analysis of the cyclical scheduling system--which assumes independent random demand--will underestimate the true safety stock requirement.