Examination of shadow prices in aggregate production planning

The aim of commercial enterprises is to provide the highest possible profit with the most proper cost. However, this objective is highly affected by limited resources (production, manufacturing, or delivery operating times, etc.) and the variability of demand. Businesses benefit from planning activities to overcome these obstacles and use resources in the best productive way. This study conveys various strategic approaches in the literature while designing a medium-term planning activity regarding the supply of demand that any business is obliged to meet in a certain period. An optimization study aimed at minimizing the cost of a six-month manufacturing process was conducted and the comparative results were discussed. While modeling quantitative problems related to various aggregate production planning strategies, linear programming technique is used, solutions are calculated with R programming language. A decision support system has been developed to easily perform calculations and different simulations. In addition, in this study, the dual problem is modeled for the first time in the aggregate production planning literature, and it provides a unique contribution to the financial valuation of production processes by calculating the shadow prices and reduced costs of resources in the light of the economic interpretation of dual variables. Improvements were proposed by comparing the initial costs and calculated shadow prices, and this study was aimed to guide for the managers and responsibles of planning departments of enterprises. Keywords: Shadow Price, Aggregate Production Planning, Decision Support System, Linear Programming, Optimization