Essays on capacity, forecasting and lot scheduling

Abstract: Production-inventory systems are concerned with the effective management of the total flow of goods, from the acquisition of raw materials to the delivery of finished products to the final customer. A production-inventory system is composed of a large number of elements which have to be managed effectively in order to deliver the final products in appropriate quantities, to where they are required, at the desired time and quality, and at a reasonable cost. This thesis is concerned with quantitative methods for managing some of the elements in an inventory-production system. The elements in focus are primarily; forecasting, lot sizing, and scheduling under capacity constraints. Besides an introductory overview four research papers are included in this thesis. These four papers are referred to as papers A-D. A: Levén, E. and Segerstedt, A. Polarica’s wild berries; An example of a required storage capacity calculation and where to locate this inventory B: Levén, E. and Segerstedt, A. Inventory control with a modified Croston procedure and Erlang distribution C: Brander, P., Levén, E. and Segerstedt, A. Lot sizes in a capacity constrained facility - A simulation study of stationary stochastic demand D: Levén, E. A heuristic scheduling policy for the economic lot scheduling problem with stochastic demand In paper (A) a simple capacity analysis model is presented. We could show that during the year 200X, the case company, Polarica, was operating at its capacity limit. Because the inventories controlled by Polarica mainly consist of production inventories and not finished-goods inventories, and that the berries are over-picked and sorted frozen, we proposed to locate the additional storage capacity in the vicinity of existing production facilities. This example or case presents ideas about how to tackle similar problems in other companies. The second paper (B) aims to provide insights into the area of forecasting, especially forecasting demand for products that show intermittent demand patterns i.e. low volume products that are infrequently requested by customers. In the third paper (C), some well- known procedures for calculating optimal economic lot sizes in a capacity constrained facility are studied. The main focus of this study is to investigate the behaviour of a production system, using optimal economic lot sizes, when facing stochastic demand. The final paper (D) is a type of an extension to the third paper (C). In (D) a scheduling policy or series of decision rules are introduced for the capacity constrained production facility facing stochastic demand. The scheduling policy is set to change the optimal lot sizes calculated as in (C) to obtain feasible production schedules when additional constraints are introduced in terms of the current inventory situation.