In today’s global competition, effective coordination of operations is vital for supply chains that must be cost-efficient and flexible, supplying a broad range of products while maintaining high service levels in the face of uncertain demand. There is a need for efficient production and inventory planning procedures to manage production networks.
Although problems related to the planning of production and inventories have been widely addressed in the fields of production management and operations research, a comprehensive solution to the problem as faced in industry is still unavailable. In particular, production planning and safety stock placement are typically treated as independent decisions, while in reality they are integrated through production cycle times. The expected production cycle time increases nonlinearly with resource utilization, which, in turn, is determined by the production plan. Furthermore, the size and placement of safety stocks depend on the demand over a replenishment period that includes production cycle times. Therefore, treating production planning and safety stock decisions as independent would certainly erode the performance of production networks.
The objective of this project is to develop models and algorithms for the integrated production planning and safety stock placement problem, while taking into account workload-dependent production cycle times, and assess the value of this integration using case studies from the semiconductor industry.