Hierarchical production planning for consumer goods

Abstract In this paper the mathematical logic behind a hierarchical planning procedure is discussed. The planning procedure is used to derive production volumes of consumer products. The essence of the planning procedure is that first a commitment is made concerning the production volume for a family of similar products and in a second stage the committed production volume is allocated among the products within the product family. A computationally attractive procedure is developed to compute the aggregate production volume and the allocated quantities, such that some target customer service level is achieved. The procedure is based on a combination of exact reasoning, approximation schemes and empirical findings. Numerical results showing the excellent performance of the procedure are included.