Sustainable Production Planning Supporting Entrepreneurial Success and Environmental Friendliness

Sustainable Production Planning Supporting Entrepreneurial Success and Environmental Friendliness

Markus Heck (SAP AG, Germany)
DOI: 10.4018/978-1-4666-5166-1.ch016
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Abstract

This chapter proposes the use of modified algorithms for production planning that support both cost optimization as well as environmental friendliness. The key element is the implementation of non-linear cost functions based on ecological considerations for lot-size planning. Lot-size planning is an essential part of industrial production and integral part of ERP-systems. The classical approaches of lot-size optimization, which are widespread in industries, the Wagner-Whitin algorithm and the Part-Period Balancing heuristic, are enhanced with so-called eco-factors. These eco-factors allow an optimization based on cost as well as ecological factors. This eco-enhanced approach combined with the introduced concept of eco-balancing helps to reduce overall production costs. Simultaneously, the environmental impact is significantly reduced, resulting in a better carbon footprint.
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Background

Efficient production planning is essential for industrial enterprises. The same is increasingly important for ecological und sustainable business behavior. There is a change in entrepreneurial thinking due to the sensitivity about climate change, carbon emissions and rising energy prices. This new perspective has to be considered in all areas of an enterprise, especially the manufacturing area. As it is not possible to simply exchange or upgrade the existing machinery in production sites with more energy-efficient power supplies or ecological friendly systems, a new strategy has to be applied, covering the enhancement of production planning and scheduling approaches, especially the lot size planning, in order that eco-factors are considered when generating production schedules. As eco-factors occur during any production process, they cause costs – the so called eco-costs – that need to be considered. If these costs are ignored during planning they would anyhow affect total costs. The clearest example is the consideration of power consumption. The higher the energy consumption of a resource the higher the energy costs. If the energy consumption can be optimized with simultaneous lot size optimization, this would result in lower total costs. Therefore it is reasonable to take this parameter into account when creating allocation plans via lot size planning.

Taking all eco-factors that are relevant for production planning into consideration when performing lot size planning leads to the following benefits:

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