Optimization algorithm for logistic parameters

The optimization procedure has the following steps:

  1. Determine items that use the resource.
  2. Determine total demand.
  3. Set default values.
  4. Determine the remaining available capacity.
  5. Determine the item with the greatest cost advantage.
  6. Check if the available capacity is sufficient.
  7. Increase production frequency.
  8. Report totals and update database.

Details of the calculation

The optimized time period is determined by the Start Date field and the Finish Date field in the Resource Cost Values (cprao3120m000) session.

Step 1: Determine items that use the resource

LN uses the resource's routing to determine the set of items that must be optimized. LN considers only the routing operations that are effective in the optimized time period.

Step 2: Determine total demand

The demand of each item is the sum of forecast demand and actual demand as recorded in the master plan (see Item Master Plan (cprmp2101m000) session).

LN corrects the total demand to account for:

  • Starting inventory.
  • Scheduled receipts.
  • Inventory plan.

Step 3: Set default values

The default for the number of times an item is produced in the optimized time period is one. In the following steps, the computation procedure will increase this number stepwise, until the optimum is reached.

However, LN checks if an item has previously been optimized. If an item has been optimized based on the resource parameters of a higher-priority resource, the number of times the item is produced is based on the previous calculation. LN does not change that number anymore. See Resource priority for optimization.

Step 4: Determine the remaining available capacity

LN determines the remaining available capacity of the resource in the specified time period as follows:

AC = (F - S) * (1 + (OP/100)) - ACR
AC remaining available capacity
F Total capacity of the resource
S Capacity reserved for production orders
OP Overtime percentage
ACR Additional capacity requirements

For more information about the calculation of the remaining available capacity, refer to online manual topic Example: to calculate the remaining available capacity.

ACR is the sum of (R x D + S x F) for all items, where:

R Required capacity per item unit
D Total demand over the time period
S Required capacity for setting up the resource
F Number of times an item is produced in the optimized time period

For more information about the calculation of additional capacity requirements, refer to online manual topic Example: to calculate additional capacity requirements.

The number of times an item is produced in the optimized time period is equal to the number of changeovers from one product to another.

If no capacity is left, the computation stops.

The total capacity and the capacity reserved for production orders are displayed by plan period in the Available Capacity field and in the Capacity Used for Production Orders field in the Resource Master Plan (cprmp3501m000) session.

You can define the overtime percentage in the Overtime Percentage field in the Resource Cost Values (cprao3120m000) session.

Step 5: Determine the item with the greatest cost advantage

LN investigates the effect of increasing the number of times an item is produced by one. An increase in the number of times an item is produced implies:

  • More frequent production orders.
  • Shorter order interval.
  • Smaller lot size.
Note:  LN does not change the number of times an item is produced for items with a higher priority than the current priority.

LN calculates the cost of each item. For details of the cost calculation, see online manual topic Computing lot-size-related costs.

LN selects the item with the greatest cost advantage. However, if the cost cannot be decreased any further, the computation stops.

Step 6: Check if the available capacity is sufficient

LN checks if the available capacity is sufficient to produce the item. If not, LN goes back to step 5 and retrieves another item. If LN cannot find a suitable item, the calculation proceeds with step 8.

Step 7: Increase production frequency

LN increases the number of times the selected item is produced by one. The other items remain unchanged in this step. The available capacity is decreased. The calculation goes back to step 5.

Step 8: Report totals and update database

LN prints a summary report of the optimization and updates the order parameters in the Plan Items - Optimized Lot Sizes (cprao3110m000) session.

For information about the calculation method that LN uses to determine the optimized order parameters, refer to online manual topic Example: to calculate the optimized order parameters.

LN takes the order lead time and the safety time into account in the calculation of the total inventory cost.