Integrating Process Optimization and Inventory Planning in Cutting-stock with Skiving Option: an Optimization Model and its Application

We consider a two-stage flow line where the first stage produces components for the downstream assembly stage. An integer programming model which integrates decisions at both the planning and the operation level is proposed, with the aim of minimizing production, holding and transportation costs. The model is tested on instances built on the basis of a real cutting process with skiving option, i.e., with the possibility of recombining components to obtain required parts. The implementation of the proposed methodology allows the integration of two hierarchical decision levels (short-term operations vs. mid-term planning) and functional areas (production vs. purchase of materials) within a single planning model, and provides an example of how an element of an Advanced Planning System (APS) could be designed. Moreover, the use of suitable cost figures in the model allows to correctly manage the insertion of hot orders of finite parts.