An extended MRP approach and application: Turkish jewelry industry

It is important to manage reverse material flows such as recycling, reusing and remanufacturing in a production environment. This study addresses a production planning problem which involves reusing of scrap and recycling of waste that occur in the various stages of the production process and remanufacturing/recycling of returns in a closed-loop supply chain environment. An extended material requirement planning (MRP) is proposed as a mixed integer linear programming (MILP) model which includes –beside forward- these reverse material flows. The proposed model is developed for the jewelry industry in Turkey, which uses gold which is a precious metal as the primary resource of production. The aim is to manage these reverse material flows as a part of production planning to utilize resources. In terms of production planning, MRP has a key role which generates outputs such as production orders, capacity requirements, raw and semi material requirements by using customer orders, bill of materials (BOM), routings for capacity requirements as main data and inventory status records as initial planning status. Classical MRP only considers forward material flows. Many papers that include details about the MRP process can be found in the literature. In addition to classical MRP process, there is also another type that handles reverse material flows which is called reverse MRP that takes into account the disassembly of the products as a separate process alone. Additionally, another approach takes both forward and reverse movements into consideration together at production planning which extends MRP approach that is called as "Extended MRP". The jewelry industry has a distinctive characteristic due to its use of precious metals as raw materials. Using metals as a raw material is a specific characteristic needed to be analyzed in the view of production planning as precious metals are recyclable and reusable in production. Using precious metals such as gold also has its financial value. Considering the customer and supplier based material movements, jewelry production can be considered as a closed-loop supply chain. The extended MRP approach is capable to give a basic solution to the production planning problem of jewelry industry. But it needs to be expanded and extended to consider the specific production characteristics of jewelry. The existing research on extended MRP approach uses an input-output model by using matrices to solve the MRP process by basically using only BOM and predefined ratios, periodicity being excluded. The cost is not taken into the consideration for reusing or recycling decisions and there is no cost minimization for recycling, supplying or reusing decisions. There should be a time interval of the scraps collected for economic recycling level. Scrap and loss ratios of production are not so deterministic and have to be managed as an uncertainty. Furthermore, there should be a decision mechanism to remanufacture or recycle a returned product. A financial deduction is registered as gold on the side of the supplier, as gold is used as a currency in financial reports. Besides, there is a periodicity in production and capacity constraints. These are the motivations of this study to resolve for the jewelry sector of Turkey. It is anticipated that this study may open new perspectives for other researchers, other industries and countries seeking guidance for dealing with their similar problems. When the literature is reviewed, there is no similar research for this type of problem. Moreover, it is not probable to obtaining MRP approach for jewelry. The main objective of this study is to reach a solution for jewelry production planning problem in Turkey. The production process involves back and forth movements simultaneously. Gold is used as a raw material and financial instrument at the same time. Collections and returns of gold from customers, its purchasing and recycling from suppliers and everything in production activities relate to material movements of gold and have effects on production planning. Cost coefficients are used as ratios of production amount in the unit of gold. These are requirements which seem specific to the Turkish jewelry industry. A mathematical model has been proposed to resolve these problems, which has been observed to be nonlinear due to the description of some production processes. Nonlinear mathematical problems are hard to solve and there is no global optimal solution. Thus, using a linearization technique, this problem is defined as a MILP mathematical model, which is solved to find an optimal solution. This study's main motivation is the production planning problem encountered by a gold jewelry company in Turkey, which has to manage recycling, reusing and remanufacturing in coordination with the production process. This cost minimization production planning problem contains multiple products, multiple plants and capacity constraints of more than one period production environment, regarding only one bottleneck raw material, gold, and recycling, reusing and remanufacturing of raw material gold and products containing gold as raw material. The problem involves material flows both for in process, and out of process such as supply, demand, return and collection of gold. For this production planning problem, a MILP MRP model is developed for the gold jewelry industry in Turkey with recycling, reusing and remanufacturing. The proposed model considers reverse material flows both in processes, such as recycling, reusing and remanufacturing, and out of processes, such as supplier based recycling, returns and collections from customers as raw material gold. Main outputs of the proposed model are the main production schedule consisting of the products to produce and raw material needed; product and raw material stock quantity end of every period; amount of demand met; capacity usages; recycle, scrap and waste quantities or raw material; returned product recycling and remanufacturing quantities; and the raw material supply amount for each period. The main aims of the model are minimizing the total production cost; planning of scrap and waste recycling; planning return remanufacturing and recycling; planning of raw material supply (mainly gold supply in this model); minimizing demand backlog; minimizing finished product and raw material stock level; effective resources usage; considering scrap, waste and return recycling and collections as raw material gold to minimize supply cost and considering returned product remanufacturing to minimize total production cost. Constraints of the model are the stock, production and demand balance constraints for the finished product; raw material stock and supply constraints; operational resource capacity constraints and non-negativity, binary and integer subjections for the decision variables. Relevant literature review about MRP with recycling and remanufacturing and MRP including fuzzy solutions was conducted. Currently, there are a bunch of studies about production planning and MRP in the literature. Literature was surveyed by considering the characteristics of the problem, production planning with recycling, reusing and remanufacturing. The concept of fuzzy production planning is also reviewed due to handling uncertainty of recycling in production planning. When MRP literature with recycling and remanufacturing processed is reviewed, reverse MRP and extended MRP approaches are observed. Despite all these researches in related areas, there has been no research on MRP with recycling and remanufacturing in the literature, so far. Particularly for jewelry industry, the MRP model has not been researched by including aspects like recycle, remanufacture, supply, collect and returns. In this study, recycling and remanufacturing were studied in a mathematical model for MRP and returned products and work in process materials were considered as recycle resource. Additionally, remanufacturing and recycling decision was included in the proposed model. In spite of deterministic characteristic of most studies, there are many uncertainties in real cases as a part of production planning process. Adding fuzzy constrains or coefficients to mathematical models generally makes models non-linear. Mostly, α-cuts fuzzy parametric linear programming approach is utilized to keep mathematical model linear, considering the difficulty of solving nonlinear mathematical problems. In this study, the presented extended MRP approach was transformed with fuzzy coefficients into a fuzzy extended MRP approach. This study extends the literature by proposing a new approach for extended MRP on a jewelry case from Turkey which includes recycling, reusing and remanufacturing decisions as a part of production planning processes. Additionally, due to the unpredictable nature of these reverse material movements, the proposed approach was also transformed into the fuzzy MRP application to handle uncertainties over this kind of process in production planning, contributing to literature. In addition to the deterministic model, the proposed approach also transformed the model into a fuzzy MILP model for MRP to handle uncertainties, so that the unpredictable nature of reverse material movements like recycle process efficiency in production planning can be taken into account. The proposed deterministic model certainly defines all aspects of the problem. However, the effectiveness of the adopted recycling process in the proposed model is difficult to predict deterministically. Beside of that uncertainty, also as our literature survey suggests, there exist other uncertainties based on demand, supply, process and environment. The scope of this paper is limited to recycling uncertainty only, because of the high financial value of gold as the raw material in the jewelry industry. Although recycling is not a hundred percent efficient process, the amount of loss remains uncertain. The proposed MILP approach was modeled non-linearly by definition at first hand. Therefore, there was no optimal solution and the model was difficult to solve. To manage this challenge, binary linearization was used to transform it into a MILP model. In other words, adding fuzzy definitions to the model also could change model to non-linear. To deal with this situation, the proposed MILP was transformed according to linear programming fuzzy solutions. As the fuzzy set approach to handle uncertainty, parametric linear programming was used with α-cuts and an interactive resolution method with decision maker. The proposed model developed for the production planning problem was applied on one of Turkey's jewelry manufacturers. This company has a production planning system based on standard MRP. It takes orders from both domestic and foreign customers. Weekly production plans are made on a daily basis, by taking the deadlines of orders received into account. Orders are planned by considering the production cost and production capacity in the plants, since products can be produced in different plants. As the raw material, gold is the main bottleneck in planning and must be used in the most effective manner. In jewelry the planning of the raw material with all aspects is the basis of production planning. This study proposes an extended MRP model using MILP technique for the production planning problem of jewelry industry in Turkey by regarding recycling, reusing and remanufacturing in addition to standard production planning. The proposed model covers both forward and reverse material flows in a closed-loop jewelry supply chain which considers process, supply and customer side simultaneously. Furthermore, linear fuzzy programming methods are applied taking the unpredictable nature of the recycling process into account with fuzzy type-1 and type-2 uncertainty. These are the main contributions of this paper which extend literature. The proposed model and fuzzy applications were examined using data from a jewelry company. The computational performance of the proposed deterministic model was presented for different solvers and planning periods. The results for the production planning run indicated how the proposed model handles reverse material flows. Deterministic and fuzzy model solutions were compared in terms of total cost variations for different feasibility degrees. Projections of fuzzy approaches for decision makers were presented. This study demonstrated that the fuzzy approach gave a better perspective to decision makers. The main objective was the efficient utilization of gold, a challenge for production managers, where the model proposed a solution to this main bottleneck of production. This effective production planning approach seems to be satisfying for company shareholders and production planners. Application of the proposed model indicated that this approach was practical and usable both for achieving solutions regarding computational effort and for effective production planning.