A hierarchical production planning and scheduling model is developed to solve a real-world fiber manufacturing problem. The problem under study requires determining production sequences, while considering variable setup costs in a multi-machine and multi-product environment. The concept of expected setup cost is developed to reduce the difficulty of considering sequence dependent setup costs at the aggregate level. A mixed integer linear programming model (MILP) incorporates the logic of expert systems to minimize the number and costs of machine setups and other associated costs. At the daily operational level, a set of heuristics is developed to manage contingencies, such as machine breakdowns and changes in demand. Data provided by the fiber plant is used to validate the model. Compared to the actual schedule, the results from the model are more consistent with the managerial priorities and a substantial cost savings is incurred.
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