A HIERARCHICAL APPROACH FOR CAPACITY COORDINATION IN MULTIPLE PRODUCTS SINGLE-MACHINE PRODUCTION SYSTEMS WITH STATIONARY STOCHASTIC DEMANDS

We introduce a two-level hierarchical planning and scheduling approach for multi-item, single-machine production systems facing stochastic d emand. The hierarchical approach extends the existing heuristics to ha ndle situations where demand levels are high compared to the available production capacity. At the top level of the hierarchy the approach d eploys a heuristic procedure for coordinating capacity in the medium t erm. The heuristic produces target production cycle times and target s ervice levels for each of the products. It iteratively allocates capac ity to individual products for maximizing the expected profit while me eting the individual product service level targets set by the manageme nt. The bottom level of the hierarchy focuses on the short term and ai ms to realize the target service level while keeping the production cy cles stable. At this level, a fixed-sequence order up-to operational s cheduling policy which permits a limited amount of flexibility for rea cting to short-term demand variations is implemented. Demand which can not be met from inventory gets lost. We also present and discuss the r esults of extensive simulation tests under a wide range of environment s that serve to demonstrate the superiority of the approach, especiall y when the demand level is high.