Lead time anticipation in Supply Chain Operations Planning

Linear programming (LP) models for Supply Chain Operations Planning (SCOP) are widely used in Advanced Planning Systems. The solution to the LP model is a proposal for order releases to the various production units (PU) in the supply network. As we have to account for uncertainty at the shop floor, the relationship between work-in-progress (WIP) and lead time is non-linear which makes it difficult to capture in an LP model. In this paper we propose a two-stage lead time anticipation (LTA) procedure. In the first stage the material coordination problem is solved irrespective of capacity availability using an LP. This yields a schedule of planned order releases that is input to a second stage where a heuristic procedure is applied to verify lead time feasibility of the schedule. This heuristic tracks mean and variance of the aggregate workload over the planning horizon and provides aggregate order release targets that are added to the LP formulation of the first stage which is subsequently reoptimized. The result is a smoothed schedule of planned order releases. A schedule that is lead time feasible and meets all requirements may not exist at all times. By means of discrete event simulation experiments, we compare two strategies for dealing with this situation. In the conservative strategy lead time feasibility is enforced at all times whereas in the optimistic strategy lead time feasibility is allowed to be violated if this yields a higher throughput rate. Also by means of discrete event simulation experiments, we compare the LTA procedure to an LP approach where the relation between WIP and We acknowledge two anonymous referees for their comments which helped to improve this paper considerably. Michiel Jansen School of Industrial Engineering, Eindhoven University of Technology P.O. Box 513, Paviljoen E.14 5600 MB Eindhoven, The Netherlands Tel.: +31-40-2472505 Fax: +31-40-2464531 E-mail: [email protected] Ton de Kok School of Industrial Engineering, Eindhoven University of Technology Jan Fransoo School of Industrial Engineering, Eindhoven University of Technology