Inventory minimization and production scheduling: The case of a large Hong Kong company

The background of this study is a rather classical but complex inventory control/production planning/line scheduling problem of a major soft-drink company in Hong Kong. The issue that stands out for this many-product high-sales manufacturer is the storage space of its central warehouse, which often finds itself in the state of overflow or near capacity with finished goods and work-in-process inventory. This phenomenon can create immediate interruptions of production, capital tie-ups and subsequent potential of lost sales. Another obviously important concern is the meeting of forecast demands. A mathematical modelling approach that entails techniques of multi-period aggregate optimization is proposed to tackle the overall problem. The dual objectives are to achieve better production planning and line scheduling in order to minimize inventory build-up and maximize demand satisfaction. Numerical results for a sample problem are reported as an illustration to this proposed two-phase approach.