Planning horizons for master production scheduling

This study addresses the issue of planning horizons for companies employing a make-to-stock competitive strategy facing a seasonal demand for their products. The authors formulate the aggregate planning problem and the master scheduling problem as two separate mathematical programs to approximate the two-stage process that typically takes place in practice. Rolling planning horizons are used to approximate the periodic updates of the plans commonly done in practice. The models also incorporate resource requirements planning concepts to estimate loads on the critical work centres. The planning process is simulated as a single pass procedure where the results of aggregate planning are passed to the master production scheduling model once per month and the results of the master scheduling model (i.e. the portion of the master schedule actually implemented) are passed back to the aggregate planning model for the next planning session. The experimental results show that when the planner faces extreme cost structures such as high smoothing cost/high setup costs or low smoothing costs/low setup costs, the planning horizon effects are reduced to a minimum. Master schedule planning horizons need not be as long as aggregate planning horizons. Alternatively, non-extreme cost structures such as high smoothing costs/low setup costs and low smoothing costs/high setup costs should be handled with equal planning horizons for both aggregate planning and master scheduling. It is also found that the firm’s cost structure has an impact on the appropriate planning horizon for both aggregate planning and master scheduling. Some cost conditions allow for smaller master schedule horizons. The best horizon choice seems to be equal planning horizons for both aggregate planning and master scheduling, even though the cost savings is slight in some cases. Finally, the proper length of the planning horizon for master scheduling is affected by the planning horizon of the aggregate plans.