Multi-criteria model of material requirements for the operating schedule of job production

Economic & mathematical methods and models

This paper presents a multi-criteria optimization model for flows of materials and component products of an operating production schedule. The model considers the following industrial production situation: a job manufacturing operation with high stochastic product demand, high materials-output ratio, many technological conversion stages and prolonged manufacturing cycle.  The main goal of optimizing the manufacturing process is in minimizing the costs of purchasing and storing the material and component. Getting quantity discounts helps to minimize purchasing costs, and minimization of storage costs is achieved by minimizing the time between the shipping date and the date when the purchased material or component products is required in production.  The proposed model allows to make a transition from the methodology of purchasing under a specific order to the methodology of requirements for operating production schedule, which leads to keeping down the costs of inventory storage and cutting the wait time of production. Moreover, a significant advantage of this methodology is due to the factthat purchasing an optimum size of materials and component products helps maintain working capital turnover at high level.  The universality principle has been applied in developing this two-criteria model. The universality principle considers planning schemes, reserve stock control and accounting within every inventory item with consideration for the operating schedule of product launching. The proposed economic-mathematical model develops the methodology of reserve stock rate, which consists in calculating the verisimilar overrun in planning material consumption and determination of an urgent minimum inventory at a point in time.