MULTISTAGE PRODUCTION PLANNING

The impact of poor production and inventory planning can be significant in any manufacturing firm. On an aggregate level, excessive inventories can lead to poor cash flows necessitating to cover operational costs while stock outs can lead to customer service problems and the eventual loss of business. Therefore managers must utilize their aggregate resources effectively while optimizing individual item run quantities on a daily operational level. This study presents an analytic framework for a hierarchical treatment of a multi-stage linear programming production and inventory problem. The problem addressed is multi-item, capacitated, and linear. The hierarchical procedure not only makes business and organizational sense, but is also analytically feasible, computationally attractive, and reduces detailed forcasting requirements.