Aggregate Planning in Supply Chains by Pinch Analysis

This work presents a novel extension of the targeting methods from pinch analysis to aggregate planning in supply chains. Aggregate planning aims at meeting demand over a specified time horizon in a way that maximizes profit through optimal levels of production, capacity, subcontracting, inventory, and stockouts. It is demonstrated how minimum production rates for a given demand forecast may be targeted through composite curves on a time versus material quantity plot. The grand composite curve (GCC) representation may be conveniently used to depict how surpluses and shortages in inventory fluctuate over time. The pinch corresponds to the point of minimum lead time and zero inventory. An example problem is used to illustrate the approach. The initial aggregate plan from pinch analysis exactly matches the solution reported in literature obtained by solving a linear programming formulation. On the other hand, the final aggregate plans from the pinch targeting method are superior to the solution in literature, as they are more realistic. It may be concluded that the production composite determined by the pinch targeting method provides either the best aggregate plan or an excellent starting point to reduce computational time for a solution by mixed integer linear programming.