Dynamic Programming Approach in Aggregate Production Planning Model under Uncertainty

In order to achieve a competitive edge in the market, one of the most essential components of effective operations management is aggregate production planning, abbreviated as APP. The sources of uncertainty discussed in the APP model include uncertainty in demand, uncertainty of production costs, and uncertainty of storage costs. The problem of APP usually involves many imprecise, conflicting and incommensurable objective functions. The application of APP in real conditions is often inaccurate, because some information is incomplete or cannot be obtained. The aim of this study is to develop APP model under uncertainty with a dynamic programming (DP) approach to meet consumer demand and minimize total costs during the planning period. The APP model includes several parameters including market demand, production costs, inventory costs, production levels and production capacity. After describing the problem, the optimal APP model is formulated using artificial neural network (ANN) techniques in the demand forecasting process and fuzzy logic (FL) in the DP framework. The ANN technique is used to forecast the input demand for APP and minimize the total cost during the planning period using the FL technique in the DP framework to accommodate uncertainties. The model input is historical data obtained through interviews. A case study was conducted on the the need for aluminum plates for the automotive industry. The results show that the ANN technique proposed for demand projection has a low error value in forecasting demand and FL in the DP framework is able to find minimal production costs in the APP model.