During a single planning period, Kimberly-Clark Latin America manufactures dozens of stock-keeping units (SKUs) in varying quantities using a few machines. The same SKU can be manufactured on multiple machines, some of which are more efficient than others. In addition, the setup time for an SKU is sequence dependent, and its demand is stochastic between planning periods. The stochastic demand necessitates changing production plans each planning period; given the large number of SKUs and small number of machines, this leads to inefficiencies. This paper describes the formulation and corresponding solution approach of an integrated inventory, production-planning, and detailed scheduling model to address the inefficiencies in lot sizing, production scheduling, and inventory management. The paper's key contribution is the solution approach, which solves the resultant industry-size NP-hard problem in minutes. The solution quality and its implementation have been tested extensively, and the model has been successfully deployed in five countries. A reduction in finished product inventories of up to 45 percent, an increase in yield and uptime of 2 percent, and improvements in service levels of 2.4 percent are directly attributable to the model and the solution approach highlighted in the paper.
All Science Journal Classification (ASJC) codes
- Strategy and Management
- Management Science and Operations Research
- Management of Technology and Innovation