Work-in-process clearing in supply chain operations planning

In this study we provide insights into the effectiveness of the clearing function concept in a hierarchical planning context. The clearing function is a mathematical representation of the relation between the Work-In-Process (WIP) and the throughput of a production process. We use it in a deterministic order release planning model to anticipate the dynamics of the operational level, which is subject to uncertainties. A multi-period single-item order release and scheduling problem is considered in which the delivery schedule of the orders is determined through the planned lead times, and the capacity loading decisions are separated from the order release decisions in a way so as to plan for on-time deliveries. Early or late delivery of the orders, which are released and delivered in batches, has not been considered explicitly in previous studies on clearing functions, and it significantly affects the inventory costs. Both linear and non-linear clearing functions are tested using a simulation approach. The results indicate that modeling the clearing of WIP by a shop should be based on the short-term operational dynamics of the shop rather than on the long-term average shop behavior, since it improves the consistency between the operational planning and scheduling levels of the hierarchy. The presented methods and results provide valuable information on modeling production characteristics in aggregate production planning and scheduling models.