Impact of forecasting error on the performance of capacitated multi-item production systems

A computer model is built to simulate master production scheduling activities in a capacitated multi-item production system under demand uncertainty and a rolling time horizon. The output from the simulation is analyzed through statistical software. The results of the study show that forecasting errors have significant impacts on total cost, schedule instability and system service level, and the performance of forecasting errors is significantly influenced by some operational factors, such as capacity tightness and cost structure. Furthermore, the selection of the master production schedule freezing parameters is also significantly influenced by forecasting errors. The findings from this study can help managers optimize their production plans by selecting more reasonable forecasting methods and scheduling parameters, thus improving the performance of production systems. q 2004 Elsevier Ltd. All rights reserved.