An Aggregate Production Planning Model With Dynamic Programming Approach for Palm Oil Industry

Abstract

A common challenge in fulfilling the demand of the raw material requirement is a continuous and repetitive work in a CPO based industry. Main type of operations and procurement in this work lead to how to identify factors that affect the Aggregate Production Planning (APP) system in a CPO based industry. The objectives of this work including how to construct the forecasting model of raw material supply and demands, and to develop an aggregate production planning model in CPO based industry with a dynamic programming approach, and eventually to optimize the total production cost and increase the profit. Parameters of the production process in the APP system consists of working time, productivity, production capacity, inventory level, inventory capacity, subcontract and cost parameters. The forecasted demand of CPO was computed by Additive Decomposition. The forecasted supply of raw material was computed by Multiplicative Decomposition Method. The model showed that the total minimum cost of the CPO production for a year is around Rp 126 Billion. The result of DP showed a potential forecasted profit in the next year.