An Application Of An Inventory Model For Production Planning

A good alignment between customer demand (in terms of quantity and timing) and production orders results from an effective and efficient production plan. This chapter concerns the production planning of a production line in a finishing process of rolled tissues at a case study manufacturer. The case study is making rolled tissues under a make-to-stock manufacturing environment, which is a normal practice for commodity products. Thus, its production plan can ensure that the customer service level requirements will be achieved at a "just-enough" level of inventory. Currently, the case study cannot fulfill customer demand for all items at the required service level. In addition, it is not clear how much inventory is just enough for them. Thus, this chapter aims to improve the current production planning method to serve customers better with an appropriate level of inventory. The simple reorder point fixed order quantity inventory model is introduced in a new production planning method that comprises two components: establishing inventory policy and determining production orders. The proposed method is tested with the actual demand data and then compared with the current method. The results show that with the proposed method all items can pass the service level requirements. In addition, there are savings from inventory and setup reduction of approximately 37% and 27% respectively.