Aggregate Planning in Make-to-Order Environments

Aggregate Planning - Aggregate Planning in Make-to-Order Environments Abstract number 002-0326 Brian D Neureuther School of Business Indiana State

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Unformatted text preview: Aggregate Planning in Make-to-Order Environments Abstract number 002-0326 Brian D. Neureuther School of Business Indiana State University Analytical Department Terre Haute, IN 47809 Phone: (812) 237-2116 FAX: (812) 237-8133 [email protected] Proceedings of the Second World Conference on POM and 15th Annual POM Conference, Cancun, Mexico, April 30 - May 3, 2004. 1 Abstract An aggregate plan for a make-to-order steel fabrication plant for a set of product archetypes is developed. An aggregate linear programming model is used to develop the aggregate plan, taking into account the difficulties that arise in planning in a make-to-order environment. A description of the facility modeled, the aggregate plan, and implications are discussed. Significantly cost savings for the implementation of the aggregate plan results. Further analysis will be conducted to then create a production schedule for the facility. Key Words : Aggregate Planning, Linear Programming, Make-to-Order 2 1. Introduction Aggregate planning in make-to-order environments is challenging due to the inability to store large amounts of inventory to buffer against large changes in demand. It is also more challenging due to the larger number of different products that can be produced. However, the need to plan for production in these environments cannot be overlooked. Just as with make-to- stock production, the need to keep inventory levels low, meet due date requirements, and efficiently operate the facility are paramount to a company’s success and competitiveness in their respective industry. The steel fabrication industry is no exception, especially with the current need for steel fabrication companies to produce fabricated products quickly, at a reasonable cost, and within a global environment. Our approach, due to simplicity, ease in understandability of management, and the little marginal gain in accuracy from more advanced methods, is to use a linear programming approach to develop the aggregate production plan for a steel fabrication plant located in the Midwest. A linear programming model that minimizes total costs for an aggregate production plan is developed. This model requires forecasts of aggregate monthly demand, and in turn yields a production plan for each month over a twelve month rolling horizon. Other methods described in the literature that have been used to develop aggregate plans consist of nonlinear integer programming techniques (Rajagopalan, 2002), heuristics or algorithmic techniques (Dejonckherre et. al, 2003 and Chang et. al, 2003), goal programming techniques (Leung et. al, 2003) and fuzzy logic (Fung, et. al, 2003). In addition, Rao et. al (2004) utilize a two-stage integer stochastic program in which they determine the products to produce and how much to produce, similar outputs of an aggregate plan....
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This note was uploaded on 03/24/2011 for the course IE 647 taught by Professor Iean during the Spring '11 term at Oregon State.

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Aggregate Planning - Aggregate Planning in Make-to-Order Environments Abstract number 002-0326 Brian D Neureuther School of Business Indiana State

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