Hierarchical Planning Methodology for a Supply Chain Management

Hierarchical production planning is a widely utilized methodology for real world capacitated production planning systems with the aim of establishing different decision–making levels of the planning issues on the time horizon considered. This paper presents a hierarchical approach proposed to a company that produces reusable shopping bags in Chile and Perú, to determine the optimal allocation of resources at the tactical level as well as over the most immediate planning horizon to meet customer demands for the next weeks. Starting from an aggregated production planning model, the aggregated decisions are disaggregated into refined decisions in two levels, using a couple of optimization models that impose appropriate constraints to keep coherence of the plan on the production system. The main features of the hierarchical solution approach are presented.