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Solving Aggregate Planning Problem Using LINGO

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 IJISET - International Journal of Innovative Science, Engineering & Technology, Vol. 4 Issue 12, December 2017
ISSN (Online) 2348 – 7968 | Impact Factor (2016) – 5.264
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Solving Aggregate Planning Problem Using LINGO

Anand Jayakumar A1, Krishnaraj C2 and Balakrishnan S3
P P P P P

1
P Department of Mechanical Engneering, SVS College of Engineering,
P

Coimbatore, Tamil Nadu, India

2
P P Department of Mechanical Engneering, Karpagam College of Engineering,
Coimbatore, Tamil Nadu, India
3
P P Department of Mechanical Engneering, United Institute of Technology,
Coimbatore, Tamil Nadu, India

Abstract planning (APP). Fuzzy logic was applied to solve the

The goal of aggregate planning is to maximize profit while uncertain production, demand, capital and warehouse
meeting demand. Aggregate planning is an operational activity spaces. All costs are taken as triangular fuzzy numbers.
that does an aggregate plan for the production process, in Model is developed such that the system takes minimum
advance of 6 to 18 months, to give an idea to management as to subcontracted units in each period and no inventories at
what quantity of materials and other resources are to be procured
and when, so that the total cost of operations of the organization
the end of the planning horizon
is kept to the minimum over that period. In this paper we solve a
numerical problem using LINGO software. Mohamed K. Omar et al (3) have developed a a fuzzy
Keywords: Aggregate planning; Maximize profit; LINGO.
25T
mixed-integer linear programming (FMILP) modeling
approach to deal with the multi-product APP problems
confronting the specialty chemical plant. The objective of
1. Introduction the proposed model is to minimize the sum of production,
set-up, inventory, backorder and workforce costs. The
The goal of aggregate planning is to maximize profit while model formulation incorporates the fuzzy set theory and
meeting demand. Every company, in its effort to meet possibilistic theory to define the uncertainties that appear
customer demand, faces certain constraints, such as the in the model’s objective and constraints.
capacity of its facilities or a supplier’s ability to deliver a
component. A highly effective tool for a company to use Navid Mortezaei et al (4), develop a new multi-
when it tries to maximize profits while being subjected to objective linear programming model for general APP for
a series of constraints is linear programming. Linear multi-period and multi-product problems. They have
programming finds the solution that creates the highest assumed that, there is uncertainty in critical input data (i.e.,
profit while satisfying the constraints that the company market demands and unit costs). This model is suitable for
faces. 24-hour production systems. To show practicality of their
model, they have implemented this model in a case study.

2. Literature Review MstNazma Sultana et al (5), have discussed aggregate

planning strategies and a special structure of transportation
Ghulam Asghar et al (1), have made a study about the model is investigated for the aggregate planning purpose
suggestion of an alternate model of medium of ―Bangladesh Cable Shilpa Ltd, Khulna‖. For this
range/aggregate production planning (APP) for the process transportation problem, all the unit costs, supplies,
industry. This research is conducted according to the demands & other values are taken from a case study. The
forecasted demand of six months of a leading Cement forecasting demand values are determined using Single
Industry of Pakistan. Different alternatives have been Exponential Smoothing Forecasting technique. A real life
discussed and a proposed model has been developed and unbalanced transportation problem is discussed and solved
analyzed. to bring the most efficient technique of reducing
transportation and storage cost.
Seema Sarkar (Mondal) and Savita Pathak (2) have
presented an application of fuzzy mathematical R. Tavakkoli-Moghaddam, N. Safaei (6), have
programming model to solve aggregate production presented a genetic algorithm (GA) for solving a

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 IJISET - International Journal of Innovative Science, Engineering & Technology, Vol. 4 Issue 12, December 2017
ISSN (Online) 2348 – 7968 | Impact Factor (2016) – 5.264
www.ijiset.com
generalized model of single-item resource constrained Mohammed. Mekidiche et al (10), have presented a
aggregate production planning (APP) with linear cost new formulation of Weighted Additive fuzzy goal
functions. In this paper, They have developed the proposed programming model. The proposed formulation attempts
genetic algorithm with effective operators for solving the to minimize total production and work force costs,
proposed model with an integer representation. This model carrying inventory costs and rates of changes in Work
is optimally solved and validated in small-sized problems force. A real-world industrial case study demonstrates
by an optimization software package, in which the applicability of proposed model to practical APP decision
obtained results are compared with GA results. The results problems. LINGO computer package has been used to
imply the efficiency of the proposed GA achieving to near solve final crisp linear programming problem package and
optimal solutions within a reasonably computational time. getting optimal production plan.

Mansoureh Farzam Rad and Hadi Shirouyehzad (7), Simon Chinguwa et al (11), have made a study that
have suggested an aggregate production planning model investigates the best model of aggregate planning activity
for products of Hafez tile factory during one year. Due to in an industrial firm and uses the trial and error method on
this fact that the director of the company seeks 3 main spreadsheets to solve aggregate production planning
objectives to determine the optimal production rate, the problems. Also linear programming model is introduced to
linear goal planning method was employed. After solving optimize the aggregate production planning problem.
the problem, in order to examine the efficiency and the Application of the models in a furniture production
distinctiveness of this method in compare to linear company is evaluated to demonstrate that practical and
programming, the problem was modeled just by beneficial solutions can be obtained from the models.
considering one objective then was solved by linear Finally some benchmarking of other furniture
programming approach. The findings revealed the goal manufacturing industries was undertaken to assess
programming with multi objectives resulted more relevance and level of use in other furniture firms.
appropriate solution rather than linear programming with
just one objective. F. Khoshalhan and A. Cheraghali Khani (12), have
proposed an integrated aggregate production planning
Reza Ramezanian et al (8), have presented a paper on model considering the time and costs of maintenance. This
multi-period, multi-product and multi-machine systems model indicates the optimum production size among the
with setup decisions. In this study, they developed a mixed optimum time of preventive maintenance. As a final point,
integer linear programming (MILP) model for general in order to check the reliability of the proposed model, an
two-phase aggregate production planning systems. Due to example has been examined. Results show that a
NP-hard class of APP, they implement a genetic algorithm considerable amount of cost has been saved by applying
and tabu search for solving this problem. The the model.
computational results show that these proposed algorithms
obtain good quality solutions for APP and could be
efficient for large scale problems. 3. The Problem

Carlos Gomes da Silvaa et al (9), have presented an We illustrate linear programming through the
aggregate production planning (APP) model applied to a discussion of Red Tomato Tools, a small manufacturer of
Portuguese firm that produces construction materials. A gardening equipment with manufacturing facilities in
multiple criteria mixed integer linear programming Mexico. Red Tomato’s products are sold through retailers
(MCMILP) model is developed with the following in the United States. Red Tomato’s operations consist of
performance criteria: (1) maximize profit, (2) minimize the assembly of purchased parts into a multipurpose
late orders, and (3) minimize work force level changes. It gardening tool. Because of the limited equipment and
includes certain operational features such as partial space required for its assembly operations, Red Tomato’s
inflexibilityof the work force, legal restrictions on capacity is determined mainly by the size of its workforce.
workload, work force size (workers to be hired and
downsized), workers in training, and production and For this example we use a six-month time period because
inventory capacity . The purpose is to determine the this is long enough time horizon to illustrate many of the
number of workers for each worker type, the number of main points of aggregate planning.
overtime hours, the inventory level for each product
category, and the level of subcontracting in order to meet Table 1: Demand Forecast at Red Tomato Tools
S.No Month Demand Forecast
the forecasted demand for a planning period of 12 months. 1 January 1600
2 February 3000
3 March 3200

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 IJISET - International Journal of Innovative Science, Engineering & Technology, Vol. 4 Issue 12, December 2017
ISSN (Online) 2348 – 7968 | Impact Factor (2016) – 5.264
www.ijiset.com
4 April 3800 stockouts at the end of June and at least 500 units in
5 May 2200 inventory).
6 June 2200

The optimal aggregate plan is one that results in the

The demand for Red Tomato’s gardening tools from
highest profit over the six month planning horizon. For
consumers is highly seasonal, peaking in the spring as
now, given Red Tomato’s desire for a very high level of
people plant their gardens. This seasonal demand ripples
customer service, assume all demand is to be met,
up the supply chain from the retailer to Red Tomato, the
although it can be met late. Therefore the revenues earned
manufacturer. Red Tomato has decided to use aggregate
over the planning horizon are fixed. As a result,
planning to overcome the obstacle of seasonal demand and
minimizing cost over the planning horizon is the same as
maximize profits. The options Red Tomato has for
maximizing profit. In many instances, a company has the
handing the seasonality are adding workers during the
option of not meeting certain demand, or price itself may
peak season, subcontracting out some of the work,
be a variable that a company has to determine based on the
building up inventory during the slow months, or building
aggregate plan. In such a scenario, minimizing cost is not
up a backlog of orders that will be delivered late to the
equivalent to maximizing profits.
customers. To determine how to best use these options
through an aggregate plan, Red Tomato’s vice president of
supply chain starts with the first task – building a demand 4. The Modeling Framework
forecast. Although Red Tomato could attempt to forecast
this demand itself, a much more accurate forecast comes Decision Variables
from a collaborative process used by both Red Tomato and The first step in constructing an aggregate planning model
its retailers to produce the forecast shown in Table 1. is to identify the set of decision variables whose values are
to be determined as part of the aggregate plan.
Red Tomato sells each tool to the retailers for $40. The
W t = workforce size for month t, t = 1…..6
R R

company has a starting inventory in January of 1000 tools.

At the beginning of January the company has a workforce H t = number of employees hired at the
R R

of 80 employees. The plant has a total of 20 working days beginning of Month t, t = 1…..6
in each month and each employee earns $4 per hour L t = number of employees laid off at the
R R

regular time. Each employee works eight hours per day on beginning of Month t, t = 1…..6
straight time and the rest on overtime. As discussed P t = number of units produced in Month t, t….6
R R

previously, the capacity of the production operation is I t = Inventory at the end of Month t, t….6
R R

determined primarily by the total labor hours worked. S t = number of units stocked out/backlogged
R R

Therefore, machine capacity does not limit the capacity of at the end of Month t, t….6
the production operation. Because of labor rules, no C t = number of units subcontracted for Month t, t….6
R R

employee works more than 10 hours overtime per month. O t = number of overtime hours worked in Month t, t….6
R R

The various costs are shown in Table 2. Objective Function

Denote the demand in Period t by D t . The values R R

Table 2: Demand Forecast at Red Tomato Tools of D t are as specified by the demand forecast in
R R

S.No Item Cost Table 1. The objective function is to minimize the

1 Material cost $10/unit total cost (equivalent to maximizing total profit as
2 Inventory holding cost $2/unit/month
all demand is to be satisfied) incurred during the
3 Marginal cost of stockout/ $5/unit/month
backlog planning horizon. The cost incurred has the
4 Hiring and training costs $300/worker following components:
5 Layoff cost $500/worker 1. Regular – time labor cost: Recall that workers are paid
6 Labor hours required 4/unit a regular – time wage of $640 ($4/hour x 8 hours/day
7 Regular time cost $4/hour
8 Overtime cost $6/hour
x 20 days/month) per month. Because W t is the R R

9 Cost of subcontracting $30/unit number of workers in period t, the regular – time

labour cost over the planning horizon is given by
Currently, Red Tomato has no limits on subcontracting,
inventories and stockouts /backlog. All stockouts are
backlogged and supplied from the following month’s
production. Inventory costs are incurred on the ending 2. Overtime labor cost: As the labour cost is $6 per hour
inventory in the month. The supply chain manager’s goal and O t represents the number of overtime hours
R R

is to obtain the optimal aggregate plan that allows Red

Tomato to end June with at least 500 units (ie, no

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 IJISET - International Journal of Innovative Science, Engineering & Technology, Vol. 4 Issue 12, December 2017
ISSN (Online) 2348 – 7968 | Impact Factor (2016) – 5.264
www.ijiset.com
worked in period t, the overtime cost over the • Workforce, hiring and layoff constraints: the
planning horizon is workforce size Wt in period t is obtained by adding
the number hired Ht in period t to the workforce size
Wt-1 in period t-1, and subtracting the number laid off
Lt in Period t. The starting workforce size is given by
W0 = 80.
3. Cost of hiring and layoffs: The cost of hiring a worker
is $300 and the cost of laying off a worker is $500. H t R R

and L t represent the number of hired and the number

R R
• Capacity constraints: In each period, the amount
laid off, respectively in Period t. Thus, the cost of produced cannot exceed the available capacity. This
hiring and layoff is given by set of constraints limits the total production by the
total internally available capacity (which is
determined based on the available labour hours,
regular or overtime). Subcontracted production is not
included in this constraint because the constraint is
4. Cost of inventory and stockout: The cost of limited to production within the plant. As each worker
carrying inventory is $2 per unit per month and the can produce 40 units per month on regular time (four
cost of stocking out is $5 per unit per month. I t and S tR R R R
hours per unit ) and one unit for every four hours
represent the units in inventory and the units stocked overtime, we have the following
out respectively in period t. Thus the cost of holding
inventory and stocking out is
• Inventory balance constraints: The third set of
constraints balances inventory at the end of each
period. Net demand for Period t is obtained as the sum
of the current demand Dt and the previous backlog S.
5. Cost of materials and subcontracting: The material This demand is either filled from current production
cost is $10 per unit and the subcontracting cost is (in-house production Pt, or subcontracted production
Ct) and previous inventory It-1 (in which case some
$30/unit. P t represents the quantity produced and C t
inventory It may be left over) or part of it is
R R R R

represents the quantity subcontracted in period t. Thus backlogged St. This relationship is captured by the
the material and subcontracting cost is following equation. The starting inventory is given by
I0 = 1000, the ending inventory must be at least 500
units (i.e. I0 > 500), and initially there are no backlogs
(i.e. S0 = 0).
6. Final Objective: The total cost incurred during the
planning horizon is the sum of all the aforementioned
costs and is given by
• Overtime limit constraints: The fourth set of
constraints requires that no employee work more than
10 hours of overtime each month. This requirement
limits the total amount of overtime hours available as
follows. In addition, each variable must be
nonnegative and there must be no backlog at the end
of period 6 (i.e. S0 = 0).
Red Tomato’s objective is to find an aggregate plan
that minimizes the total cost incurred during the planning
horizon. The values of the decision variables in the
objective function
cannot be set arbitrarily. They are subjected to a variety of
5. LINGO PROGRAM
Model:
constraints defined by available capacity and
Min = Total_cost;
operating policies. The next step in setting up the aggregate
Total_cost = RTLC + OLC + CHL +
planning model is to define clearly the constraints linking CIS + CMS;
the decision variables.
Constraints

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 IJISET - International Journal of Innovative Science, Engineering & Technology, Vol. 4 Issue 12, December 2017
ISSN (Online) 2348 – 7968 | Impact Factor (2016) – 5.264
www.ijiset.com
RTLC = 640 * (W1 + W2 + W3 + W4 + I4 >= 0;I5 >= 0;I6 >= 0;
W5 + W6); S1 >= 0;S2 >= 0;S3 >= 0;
OLC = 6 * (O1 + O2 + O3 + O4 + O5 + O6); S4 >= 0;S5 >= 0;S6 >= 0;
CHL = 300 * (H1 + H2 + H3 + H4 + H5 + P1 >= 0;P2 >= 0;P3 >= 0;
H6) P4 >= 0;P5 >= 0;P6 >= 0;
+ 500 * (L1 + L2 + L3 + L4 + L5 + L6); C1 >= 0;C2 >= 0;C3 >= 0;
CIS = 2 * (I1 + I2 + I3 + I4 + I5 + C4 >= 0;C5 >= 0;C6 >= 0;
I6) + 5 * (S1 + S2 + S3 + S4 + S5 + @GIN(W1);@GIN(W2);@GIN(W3);
S6); @GIN(W4);@GIN(W5);@GIN(W6);
CMS = 10 * (P1 + P2 + P3 + P4 + P5 + @GIN(H1);@GIN(H2);@GIN(H3);
P6) @GIN(H4);@GIN(H5);@GIN(H6);
+ 30 * (C1 + C2 + C3 + C4 + C5 + C6); @GIN(L1);@GIN(L2);@GIN(L3);
W0 = 80; @GIN(L4);@GIN(L5);@GIN(L6);
W1 = W0 + H1 - L1; @GIN(I1);@GIN(I2);@GIN(I3);
W2 = W1 + H2 - L2; @GIN(I4);@GIN(I5);@GIN(I6);
W3 = W2 + H3 - L3; @GIN(S1);@GIN(S2);@GIN(S3);
W4 = W3 + H4 - L4; @GIN(S4);@GIN(S5);@GIN(S6);
W5 = W4 + H5 - L5; @GIN(P1);@GIN(P2);@GIN(P3);
W6 = W5 + H6 - L6; @GIN(P4);@GIN(P5);@GIN(P6);
P1 <= 40 * W1 + O1/4; @GIN(C1);@GIN(C2);@GIN(C3);
P2 <= 40 * W2 + O2/4; @GIN(C4);@GIN(C5);@GIN(C6);
P3 <= 40 * W3 + O3/4; End
P4 <= 40 * W4 + O4/4;
P5 <= 40 * W5 + O5/4; 6. Computational Efficiency
P6 <= 40 * W6 + O6/4; An intel CORE i5 processor (Second Generation) with
S0 = 0; 4GB RAM was used to process the model. Windows 7
I0 = 1000; was the operating system. Branch and Bound solver was
I6 = 500; used.
S6 = 0; A. Numerical Problem size
D1 = 1600; Total variables: 52
D2 = 3000; Nonlinear variables: 0
D3 = 3200; Integer variables: 40
D4 = 3800; Total constraints: 79
D5 = 2200; Nonlinear constraints: 0
D6 = 2200; Total nonzeros: 189
I0 + P1 + C1 = D1 + S0 + I1 - S1; B. Run Time
I1 + P2 + C2 = D2 + S1 + I2 - S2; The problem was solved in less than 1 second.
I2 + P3 + C3 = D3 + S2 + I3 - S3;
I3 + P4 + C4 = D4 + S3 + I4 - S4;
I4 + P5 + C5 = D5 + S4 + I5 - S5;
I5 + P6 + C6 = D6 + S5 + I6 - S6;
O1 <= 10 * W1;
O2 <= 10 * W2;
O3 <= 10 * W3;
O4 <= 10 * W4;
O5 <= 10 * W5;
O6 <= 10 * W6;
W1 >= 0; W2 >= 0; W3 >= 0;
W4 >= 0;W5 >= 0;W6 >= 0;
O1 >= 0;O2 >= 0;O3 >= 0;
O4 >= 0;O5 >= 0;O6 >= 0;
H1 >= 0;H2 >= 0;H3 >= 0;
H4 >= 0;H5 >= 0;H6 >= 0;
L1 >= 0;L2 >= 0;L3 >= 0;
L4 >= 0;L5 >= 0;L6 >= 0; Fig 1: Result
I1 >= 0;I2 >= 0;I3 >= 0;

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 IJISET - International Journal of Innovative Science, Engineering & Technology, Vol. 4 Issue 12, December 2017
ISSN (Online) 2348 – 7968 | Impact Factor (2016) – 5.264
www.ijiset.com
planning‖, World Applied Sciences Journal 21 (Mathematical
7. Result Applications in Engineering): pp68-72, 2013
[4] Navid Mortezaei, Norzima Zulkifli, Tang Sai Hong, Rosnah
By optimizing the objective function subjected
Mohd Yusuff,, ―Multi-objective aggregate production
to listed constraints the aggregate plan is shown planning model with fuzzy parameters and its solving
in table 3 and 4. methods‖, Life Science Journal 2013;10(4), pp. 2406 – 2414.
TABLE 3: Aggregate Plan – Part I [5] MstNazma Sultana, Shohanuzzaman Shohan, Fardim
t Ht Lt Wt Ot Sufian, ―Aggregate planning using transportation method: a
0 0 0 80 0 case study in cable industry‖, International Journal of
1 0 16 64 0 Managing Value and Supply Chains (IJMVSC) Vol.5, No. 3,
2 0 0 64 0 September 2014, pp. 19-35.
3 0 0 64 0 [6] R. Tavakkoli-Moghaddam, N. Safaei, ―Solving a
4 0 0 64 0 generalized aggregate production planning problem by
5 0 0 64 0 genetic algorithms‖, Journal of Industrial Engineering
6 0 0 64 0 International, March 2006, Vol. 2, No. 1, 53 – 64.
[7] Mansoureh Farzam Rad, Hadi Shirouyehzad, ― Proposing
TABLE 4: Aggregate Plan – Part II
an aggregate production planning model by goal
programming approach, a case study‖, Journal of Data
t It
R St
R Ct
R Pt
R

0 1000 0 0 - Envelopment Analysis and Decision Science 2014 (2014) 1-

1 1960 0 0 2560 13.
2 1520 0 0 2560 [8] Reza Ramezanian, Donya Rahmani, Farnaz
3 880 0 0 2560 Barzinpour, ―An aggregate production planning model for
4 0 220 140 2560 two phase production systems: Solving with genetic
5 140 0 0 2560 algorithm and tabu search‖, Expert Systems with
6 500 0 0 2560 Applications 39 (2012) 1256–1263.
[9] Carlos Gomes da Silvaa, José Figueirab, João Lisboab, Samir
Total cost over the planning horizon is $422660. Red Barmane, ―An interactive decision support system for an
Tomato lays off a total of 16 employees at the beginning aggregate production planning model based on multiple
of January. After that the company maintains the criteria mixed integer linear programming‖, Omega 34 (2006)
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