The encyclopedia · Strategy & Leadership · Operational decision · 2014
Scotsburn scheduled ice cream with three linked optimizers, from year to day
Scotsburn Dairy ran ice cream production on a hierarchical MILP stack — yearly, weekly, daily — matching each model to a management level.
Scotsburn Dairy Group
the move
Scotsburn Dairy Group makes ice cream in batches where switching between products costs setup time, and demand swings wildly by season. Planning the whole year in one shot is too coarse; planning each day alone ignores inventory and labor.
The company adopted a hierarchical system of three mixed-integer programs: a monthly model plans aggregate production and inventory for the year; a weekly model disaggregates it over 13 weeks minimizing setup and holding costs; a daily model sequences products and run lengths within the labor schedule.
Because each model passes feasible targets down to the next, short-term operations reflect the long-term plan. The paper reports reduced costs, improved production efficiency, and stronger links between decisions at each management level.
why it works
- Hierarchical planning keeps each horizon tractable while preserving feasibility top to bottom.
- Sequence-dependent setups get explicit treatment at the daily level, where they actually bite.
- Aligning models with the management hierarchy means every level has a tool it owns.
what transfers
One optimizer can't serve every horizon: cascade models by management level, aggregate first then disaggregate, so decisions stay feasible at each stage and the factory follows the strategy.
what came after
The three-tier system became Scotsburn's way of running ice cream production, and the paper's design is cited as a model of hierarchical production planning where each management level has a decision tool that stays consistent with the level above.
references
- Scotsburn Dairy Group Uses a Hierarchical Production Scheduling and Inventory Management System to Control Its Ice Cream Production
- Scotsburn Dairy Group Uses a Hierarchical Production Scheduling and Inventory Management System to Control Its Ice Cream Production
spotted an error? The archive wants to know.