Balancing production level variations and inventory variations in complex production systems

In this study we analyse the behaviour of production levels and stocks in an integrally controlled multi-product multi-phase production system, We show that certain types of variations in the master production schedule (MPS) may lead to large short-term variations in production. To reduce the costs of these variations we introduce production smoothing, and we derive a modification of well-known integral production decision rules to realize smoothed production behaviour. By means of a small scale example we demonstrate the quantitative effects of our production smoothing rule on the variations in stocks and production levels. Finally, we present the general structure of a cost model that can be used to determine appropriate values for the smoothing parameters, given a specific production structure, a given capacity structure, and a given variability of the MPS. We discuss various possibilities to arrive at these values.