When to integrate strategic and tactical decisions? Introduction of an asset/inventory ratio guiding fit for purpose production planning

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Abstract

Purpose: Significant transitions in firms (e.g. outsourcing) may impact the relative importance of production and inventory assets, affecting the hierarchical separation of planning decisions. The purpose of this paper is to contribute to planning literature by investigating how the production system and the planning environment influence the performance difference between hierarchical and monolithic planning. Further, it seeks to reduce the prevailing theory-practice gap in tactical planning. Design/methodology/approach: Through an action research study, a monolithic model integrating tactical production planning decisions, subject to upstream supply chain constraints, with strategic investments decisions was developed, tested and implemented in a global OEM. Using the developed model and a measure of the capital cost of production assets relative to the cost of holding inventory, it is numerically examined how the production system and planning environment influence the performance of hierarchical and monolithic planning. Findings: The research demonstrates the potential of integrating decisions and reveals significant performance differences between hierarchical and monolithic planning for firms with low capital cost relative to inventory holding cost. Research limitations/implications: The findings suggest a fit between planning processes, the production system and planning environment. Future research should empirically validate the findings and propositions. Originality/value: The paper combine capital investments and production planning decisions, which usually transpire at different hierarchical levels and on different time-horizons, and investigates the consequences of hierarchical separation through a real-life validated case and numerical analysis.

Original languageEnglish
JournalInternational Journal of Physical Distribution & Logistics Management
Volume48
Issue number5
Pages (from-to)545-568
ISSN0960-0035
DOIs
Publication statusPublished - 2018

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assets
Planning
planning
costs
Assets
Production planning
Costs
performance
firm
theory-practice
capital investment
outsourcing
Outsourcing
planning process
action research
Supply chains
Numerical analysis
supply
methodology
Capital cost

Cite this

@article{3d1c4c246beb43208bfd38a1d20793bc,
title = "When to integrate strategic and tactical decisions?: Introduction of an asset/inventory ratio guiding fit for purpose production planning",
abstract = "Purpose: Significant transitions in firms (e.g. outsourcing) may impact the relative importance of production and inventory assets, affecting the hierarchical separation of planning decisions. The purpose of this paper is to contribute to planning literature by investigating how the production system and the planning environment influence the performance difference between hierarchical and monolithic planning. Further, it seeks to reduce the prevailing theory-practice gap in tactical planning. Design/methodology/approach: Through an action research study, a monolithic model integrating tactical production planning decisions, subject to upstream supply chain constraints, with strategic investments decisions was developed, tested and implemented in a global OEM. Using the developed model and a measure of the capital cost of production assets relative to the cost of holding inventory, it is numerically examined how the production system and planning environment influence the performance of hierarchical and monolithic planning. Findings: The research demonstrates the potential of integrating decisions and reveals significant performance differences between hierarchical and monolithic planning for firms with low capital cost relative to inventory holding cost. Research limitations/implications: The findings suggest a fit between planning processes, the production system and planning environment. Future research should empirically validate the findings and propositions. Originality/value: The paper combine capital investments and production planning decisions, which usually transpire at different hierarchical levels and on different time-horizons, and investigates the consequences of hierarchical separation through a real-life validated case and numerical analysis.",
author = "Asmussen, {Jesper Norman} and Jesper Kristensen and Kenn Steger-Jensen and W{\ae}hrens, {Brian Vejrum}",
year = "2018",
doi = "10.1108/IJPDLM-02-2018-0058",
language = "English",
volume = "48",
pages = "545--568",
journal = "International Journal of Physical Distribution & Logistics Management",
issn = "0960-0035",
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number = "5",

}

TY - JOUR

T1 - When to integrate strategic and tactical decisions?

T2 - Introduction of an asset/inventory ratio guiding fit for purpose production planning

AU - Asmussen, Jesper Norman

AU - Kristensen, Jesper

AU - Steger-Jensen, Kenn

AU - Wæhrens, Brian Vejrum

PY - 2018

Y1 - 2018

N2 - Purpose: Significant transitions in firms (e.g. outsourcing) may impact the relative importance of production and inventory assets, affecting the hierarchical separation of planning decisions. The purpose of this paper is to contribute to planning literature by investigating how the production system and the planning environment influence the performance difference between hierarchical and monolithic planning. Further, it seeks to reduce the prevailing theory-practice gap in tactical planning. Design/methodology/approach: Through an action research study, a monolithic model integrating tactical production planning decisions, subject to upstream supply chain constraints, with strategic investments decisions was developed, tested and implemented in a global OEM. Using the developed model and a measure of the capital cost of production assets relative to the cost of holding inventory, it is numerically examined how the production system and planning environment influence the performance of hierarchical and monolithic planning. Findings: The research demonstrates the potential of integrating decisions and reveals significant performance differences between hierarchical and monolithic planning for firms with low capital cost relative to inventory holding cost. Research limitations/implications: The findings suggest a fit between planning processes, the production system and planning environment. Future research should empirically validate the findings and propositions. Originality/value: The paper combine capital investments and production planning decisions, which usually transpire at different hierarchical levels and on different time-horizons, and investigates the consequences of hierarchical separation through a real-life validated case and numerical analysis.

AB - Purpose: Significant transitions in firms (e.g. outsourcing) may impact the relative importance of production and inventory assets, affecting the hierarchical separation of planning decisions. The purpose of this paper is to contribute to planning literature by investigating how the production system and the planning environment influence the performance difference between hierarchical and monolithic planning. Further, it seeks to reduce the prevailing theory-practice gap in tactical planning. Design/methodology/approach: Through an action research study, a monolithic model integrating tactical production planning decisions, subject to upstream supply chain constraints, with strategic investments decisions was developed, tested and implemented in a global OEM. Using the developed model and a measure of the capital cost of production assets relative to the cost of holding inventory, it is numerically examined how the production system and planning environment influence the performance of hierarchical and monolithic planning. Findings: The research demonstrates the potential of integrating decisions and reveals significant performance differences between hierarchical and monolithic planning for firms with low capital cost relative to inventory holding cost. Research limitations/implications: The findings suggest a fit between planning processes, the production system and planning environment. Future research should empirically validate the findings and propositions. Originality/value: The paper combine capital investments and production planning decisions, which usually transpire at different hierarchical levels and on different time-horizons, and investigates the consequences of hierarchical separation through a real-life validated case and numerical analysis.

U2 - 10.1108/IJPDLM-02-2018-0058

DO - 10.1108/IJPDLM-02-2018-0058

M3 - Journal article

VL - 48

SP - 545

EP - 568

JO - International Journal of Physical Distribution & Logistics Management

JF - International Journal of Physical Distribution & Logistics Management

SN - 0960-0035

IS - 5

ER -