Changeover Minimization and Economic Lot Sizing
Changeover Minimization & Economic Lot Sizing
Economic order quantity (EOQ) is widely recognized as antiquated and being sub-optimal for today’s complex manufacturing plants. The limitations of EOQ are very well known. Economic Lot-Sizing Problem (ELSP) was posed as an alternative to EOQ to solve for the best cost production plan but it too has many limitations. For portfolios with complex, asymmetrical changeover profiles, our Efficient Production Cycle (EPC) methodology as a viable alternative to EOQ.
One of the main deficiencies of EOQ methodology is that it does not optimize changeover costs. Changeover costs and constraints are significant in a Food and Beverage facility with allergen progression matrices, cleanup and sanitation costs, Kosher considerations, etc.
Any changeover minimizing production schedule has to also consider safety stock, transport delays, and service levels promised to customers. Our approach hinges on a combination of mathematical programming-based formulation coupled with heuristics to arrive as an efficient production cycle that optimizes changeover costs while honoring safety stock / service level constraints. The result is a significant reduction in inventory costs. OSI has successfully implemented this methodology in a snack production facility.