MODELING THE EFFECT OF DEMAND VARIATIONS ON THE PERFORMANCE OF A PRODUCTION SYSTEM

Modelling the effect of demand variations on a production system manuf acturing multiple products is discussed. The various system costs invo lved in the production system, namely set-up cost and inventory cost i ncurred due to change in demands for the products with respect to prod ucts and planning periods are estimated. A statistical modelling is pr esented for determining the production capacity and inventory level re quirement to satisfy the customer to a certain level decided by the ma nagement. Two important factors, (i) number of types of products and ( ii) multiple planning horizons are considered to identify the costs as well as the production capacity and inventory level requirements. A s tatistical method, analysis of variance (ANOVA) is used to study the v ariations in the demands and costs involved. Finally, an example is pr esented to explain the application and the behaviour of the statistica l model.