Project Scheduling Approach to Production Planning A. Márkus 1 (2), J. Váncza 1 , T. Kis 1 , A. Kovács 2 1 Computer and Automation Research Institute, Hungarian Academy of Sciences 2 Faculty of Electrical Engineering and Informatics, Budapest University of Technology and Economics, Budapest, Hungary Abstract We suggest a novel approach to modelling and solving production planning (PP) problems in make-to-order production environments. This approach unifies the capacity and the material flow oriented aspects of PP. Orders are modelled as projects that compete for limited resources. The projects consist of networks of variable-intensity activities which may require several resources at the same time. The goal is to generate production plans that satisfy all the temporal and resource constraints and minimize additional or external resource usage over the planning horizon. The model is applicable at different aggregation levels of PP, as we show with two real-life case studies. Although the capacity and material flow aspects of PP are coupled, a special solver developed for the project model efficiently solves problems of real-life sizes . Keywords : Production, planning, project 1 INTRODUCTION Production planning (PP) matches future production load and capacities by generating plans that determine the flow of materials and the use of resources over a given planning horizon. Finding an appropriate match between load and capacities is a chicken-and-egg problem. On the one hand, the actual load – and the corresponding flow of materials – should fit to the available resource capacities. On the other hand, the level of capacities should be determined so as to meet the demand over time. The problem is usually settled by fixing either the load or the capacities [1]. However, this approach can hardly be taken nowadays when the traditional boundaries of companies are getting dissolved. In the era of supply chain management, virtual enterprises and production networks the tasks of PP may cross the organizational boundaries of the firms. Decisions on the use of resources should concern both internal and external capacities; the internal flow of materials should be synchronized with the incoming and outgoing flows [2]. All this makes the PP problem extremely hard to solve. Conversely, the complex situations call for efficient, robust decision support methods at each node of a production network [2,3]. Hence, there is a need of intuitive and flexible models and fast, reliable solution techniques that scale-up well also to large problem instances. An important practical requirement for any new method is that it should be able to work by using data stored in existing – so-called legacy – production information systems. There are long-standing recipes to handle complexity. Aggregation removes details in the representation of products and orders, production processes, resource capacities, and time [1,4]. Similar problems formulated with more details are limited by shorter planning horizon. The solution is generated in a process where higher level solutions provide constraints to lower level problems. Decomposition separates PP problems into a resource and a load oriented subproblem. Decomposition is usually applied on several levels of aggregation. E.g., decomposed planning functions are traditionally termed as master production scheduling and material requirements planning on the side of the load, whereas rough-cut capacity planning and capacity requirements planning on the side of resources [1]. Below we suggest a novel approach to modelling and solving long- and medium-term capacity and production planning problems. Our method is based on a generalized version of the resource-constrained project scheduling problem [5] and unifies the resource and the material flow oriented aspects of PP. By introducing activities, we handle together resource and temporal constraints. Hence, planning can work without using lead time estimates that, in a turbulent environment, cannot represent individual orders any more [6]. The project-based approach captures the strong goal-oriented nature of make-to-order and engineering-to-order production. The paper is structured in the following way: In Section 2 the project model is presented along with the main principles of the solution technique. Then we describe how to solve PP problems in two different production environments by taking the suggested project-based approach (Sections 3 and 4). Finally, conclusions of the two case studies are drawn in Section 5. 2 THE BASIC MODEL 2.1 Resource-constrained project scheduling Resource-constrained project scheduling problems are concerned with scheduling a number of discrete activities, each requiring some resources. Constraints due to the limited capacities of resources and precedence relations between the activities are prescribed. The classical model assumes fixed activity durations and a constant rate of resource usage during the entire processing of every activity [5,7]. However, in aggregate planning the above