Optimal disaggregation of aggregate production plans

Aggregate Production Planning (APP) is concerned with a minimum cost adaptation of some production process to demand fluctuations, by means of controlling overall production rate (P) and workforce size (W). Disaggregation aims at allocating P and W to individual products such that an optimal sales program is obtained. A technique is developed which may be used for disaggregation when product contributions are nonlinear. In conjunction with an APP model, the technique can be used for a simultaneous derivation of aggregate and disaggregate decisions. This is illustrated by an application to a hypothetical production and sales planning problem.