Capacity planning and production scheduling integration: improving operational efficiency via detailed modelling

Successful capacity planning and production scheduling is built on the understanding of market opportunities and the costs of capacity, production, sourcing, inventory, and distribution over the planning horizon. Increasingly, companies attempt to integrate capacity planning and production scheduling to improve upon the commonly used sequential decision process, but most related research works fail to capture the granularity of actual operational decisions and therefore may overlook potential cost-saving opportunities. The contributions of this study include: (1) a detailed integrated capacity and production scheduling model with multiple discrete and continuous options for varying short and medium-term capacity, (2) a heuristic algorithm that exploits the problem structure to solve the nonlinear mixed integer problem, (3) an evaluation of the value of the integrated model relative to traditional practice and its sensitivity to parameters, (4) a review of past contributions to integrated planning, particularly focused on IJPR, and (5) a case study originated from a world-class automobile manufacturer illustrating how the model can be applied and confirming its value relative to hierarchical and less detailed modelling approaches.