Integrated production and distribution planning in the fast moving consumer goods industry: a block planning application

In the fast moving consumer goods industry there is an ongoing trend towards an increased product variety and shorter replenishment cycle times. Hence, manufacturers seek a better coordination of production and distribution activities. In this paper, a so-called block planning approach is presented which establishes cyclical production patterns based on the definition of setup families. For the delivery of final goods from the plants to distribution centres two transportation modes are considered, full truckload and less than truckload. The proposed mixed-integer linear optimization model minimizes total production and transportation costs. Numerical results demonstrate the practical applicability of the proposed block planning approach. In particular, a rigid and a flexible block planning approach are compared which differ by their degree of flexibility in the scheduling of the production lots.