The use of demand information in selecting production plans and schedules

Abstract

The strategic problem of selecting a production plan for a given planning horizon is usually treated as independent of the tactical problem of scheduling the production plan. This paper approaches both selecting the production plan and scheduling it as one problem. The problem is formulated as a zero-one integer program. The formulation accommodates many real-life considerations. The integer program is solved using a branch and bound procedure which provides the optimal production plan and schedule as well as the importance indices of the orders, a concept which is introduced and used in this study to rank the available orders within the planning horizon according to their importance to the firm. The integer program and the search procedure can be used as a decision supporting tool to respond to any changes in the demand information, capacity of the firm, or its operating strategy, and it guarantees the selection of feasible production plan(s) and optimal schedules.