A Two Stage Solution Procedure for Production Planning System with Advance Demand Information

Abstract

We model for ‘Naiji System’ which is a unique corporation technique between a manufacturer and suppliers in Japan. We propose a two stage solution procedure for a production planning problem with advance demand information, which is called ‘Naiji’. Under demand uncertainty, this model is formulated as a nonlinear stochastic programming problem which minimizes the sum of production cost and inventory holding cost subject to a probabilistic constraint and some linear production constraints. By the convexity and the special structure of correlation matrix in the problem where inventory for different periods is not independent, we propose a solution procedure with two stages which are named Mass Customization Production Planning & Management System (MCPS) and Variable Mesh Neighborhood Search (VMNS) based on meta-heuristics. It is shown that the proposed solution procedure is available to get a near optimal solution efficiently and practical for making a good master production schedule in the suppliers.

Keywords

• production planning
• advance demand information
• stochastic programming
• meta-heuristics
• corporation
• inventory
• correlation matrix