Optimal Disaggregation of Aggregate Production Plans

Aggregate Production Planning (APP) is concerned with a minimum cost adaptation of some production process to demand fluctuations, by means of controlling overall production rate (P) and workforce size (W). Disaggregation aims at allocating P and W to individual products such that an optimal sales program is obtained. A technique is developed which may be used for disaggregation when product contributions are nonlinear. It relies on decreasing marginal contributions as an evaluation criterion. In conjunction with an APP model, the technique can be used for a simultaneous derivation of aggregate and disaggregate decisions. This is illustrated by an application to a hypothetical production and sales planning problem.