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Cost management system within a production environment: a performance-based approach

Production planning problems have been a frequent focus of work in the literature. However, despite their importance, there are inadequate studies on control mechanisms and the representation of performance indices in a production environment. In the present paper, a hybrid production planning–project management system is presented and implemented successfully throughout a production environment. In this approach, earned value management (EVM), a powerful project management technique, is applied within a multi-period–multi-product (MPMP) production planning problem. Since EVM is a well-known technique in the area of project planning and management, it is first required to convert the MPMP problem into a project management network. Then after performing computational investigations in the lowest level of work breakdown structure, the results are sent back to the production environment again. In order to interpret and measure the manufacturing efficiency, original performance indices are proposed throughout the production planning period, product, and machine centres. In this respect, new formulas are also developed accordingly. Finally, an insight to lean production is given.