Optimal production planning by reusing components

Warehouse management aims to optimally organize stock levels and orders according to production planning and market needs. In the area of fashion goods, the variability of the demand tends to re-plan the productions in agreement with the seasonal trends and merchandise news. These changes can lead to considerable levels of raw materials that remain unused and represent a loss of profit for the company. In some cases the whole amount of materials can be spread in many warehouses located in different locations, either in a single country or worldwide. A mathematical model for reusing old stocks (obsolescent material) is presented in this paper. The model is aimed at the optimization of the warehouse management of a business company. Considering the obsolescences and the bill of materials of each product, a mathematical Integer Linear Programming (ILP) model is used to plan the production of finished goods to maximize the revenue at the net of the costs of missing components. The mix production model is refined with side constraints that limit the budget for new components, the trade-off between the number of reused and ordered parts, the whole production and the minimum and maximum quantity for each produced model and ordered part type. Real instances are solved with different values of parameters and best solutions are presented.