Production Planning in the Plastics Industry

In a highly competitive plastics industry, manufacturing good quality products is not sufficient to maintain a competitive global position. A plastic company must have the ability to deliver customized products to its customers’ doorsteps anywhere in the world – in the right quantity, at the right time, and at reasonable cost. In effect, the supply chain has become part of the product offering. With increasing supply chain complexity, this requirement puts an unprecedented burden on decision systems that allocate global capacities. Major manufacturers supply a variety of plastics to many different industries, including automotive, appliance, computer, and medical equipments. To meet the customer demand, the companies maintain manufacturing plants all over the globe. Until recently, most producers practiced a regional manufacturing philosophy wherein each product was made in the region (e.g., America, Europe, or Pacific) where it was ordered. In recent years, however, as consumer products manufacturing has shifted to the Pacific, the demand for plastics used in those products has also shifted to that region. Even as plastics companies rush to add new manufacturing capacity in the Pacific, most of them still face a geographic imbalance between capacity and demand with excess capacity in the America and insufficient capacity in the Pacific. Consequently, many have been forced to abandon the regional approach in favor of a global approach to their manufacturing operations. Although a better balance between capacity and demand remains the primary motivation, a global supply chain offers additional opportunities for reducing manufacturing costs, including: (1) economies of scale from centralizing production, (2) lower raw material costs, as these can now be sourced globally, and (3) ability to take advantage of tax breaks offered by certain countries to set up and operate plants even if that region has sufficient capacity.