Stick to the Plan or Adjust Dynamically? Combining Order Release and Overtime Planning for Varying Demand and Process Uncertainty

Within the area of manufacturing planning and control, there is a long ongoing debate on when and if decisions should be integrated into a centralized model or split into separate planning levels. While a centralized monolithic model is capable of solving separate decisions simultaneously, a hierarchical approach offers more degrees of freedom since a local planner always has more accurate information. The focus of this paper is on the design and mathematical assumptions of optimization models for overtime and order release decisions in order to cope with different degrees of demand and process uncertainty. We execute the optimal decisions within a simulation model of a multi-stage, multi-product stylized flow shop. Our results show that a fully centralized is outperformed by a hierarchical design and that planning order release quantities centrally, in combination with flexible overtime planning, yields the lowest costs for high process uncertainty on the shop floor.