Enhancing the profitability of a vertically integrated wood products production system. Part 1. A multistage modelling approach

A multistage modelling approach to production and inventory problems inhere nt in vertically integrated wood products manufacturing operations is discu ssed in this first installment of a two-part article. A multistage linear p rogramming model is presented for a production-inventory problem faced by a n integrated hardwood lumber-cabinet manufacturing operation in the South. The model can be modified easily to suit other vertically integrated wood p roducts operations. The validation and application of such a model is the s ubject of Part 2. The model provides objective, valuable information for ma king management decisions regarding many important issues, including the fo llowing: 1) desired level of production and end-of-period inventories at ea ch stage of the integrated operation in each planning period; 2) desired qu antity of products to be sold in each planning period; 3) level of resource utilization at each stage and the potential benefits of providing addition al resources or productive capacity at each stage; and 4) impact of changes in input/output and operating conditions on system profitability.