Effectiveness of nervousness reduction policies when capacity is constrained

Abstract

A number of studies have examined a variety of solutions for overcoming master production schedule nervousness which is a major cause of cost increase and material flow disruption throughout the supply chain. The study reported in this paper provides a comprehensive review of the literature and provides insights on the effect of capacity constraints on the effectiveness of policies for dampening schedule nervousness. The insights on the impact of capacity constraints are then confirmed via a simulation study investigating the effectiveness of three nervousness reduction policies. The relative effectiveness of the policies (freezing a portion of the schedule, using safety stock at the end item level, and a combination policy of freezing and safety stock) are examined under a variety of conditions characterised by variations in the level of demand uncertainty faced by the system and product structure complexity.

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