Optimization-based system for production planning and sequencing at woongjin chemical

Abstract

This study focuses on an actual project that improves the inventory level by 24.5%. Woongjin Chemical, a leading company of filter products and synthetic fibers in Korea, was suffering from high level of inventory. To reduce the inventories and the operational inefficiencies, Woongjin Chemical embarked on a project on its Micro Filter business with KAIST and Deloitte Analytics Korea in March 2012. To figure out the cause of the inventory pile-up, we analyzed the data and the business process throughout the whole supply chain. The complexity and uncertainty of the decision making between the sales department and the production department led to the increase of the inventory. To solve this situation, we developed an optimization-based system for production planning and sequencing. The production planning is formulated by a mixed integer linear programming with the earliness and tardiness penalty function. A heuristic combining minimum slack time (MST) and shortest processing time (SPT) with a push-back procedure is proposed. For the daily sequencing with sequence-dependent setup time, we formulated a traveling salesman problem (TSP) with the closest unvisited city rule to minimize the setup time. After a one-month test period in July 2012, we implemented our optimization model to the company’s IT system, where the data acquisition and the user interfaces are provided. The business process was also redesigned along with the optimized logic. As a result, the optimized decision making process of production planning and sequencing has been successfully executed enterprise-wide. For seven months of execution, from July 2012 to January 2013, it helped Woongjin Chemical Micro Filter business to reduce the inventory level of finished product by 24.5% and to improve the lead time by 23.3%.