Steel manufacturers produce slabs, coils and sheets usually on a make-to-order basis. However, surplus items can be produced for three reasons:
Some amount of inventory is desirable to accommodate rush or regularly placed orders. However, in many circumstances, inventory not only has a negative impact on cash flow, but also requires storage space. Hence, from the viewpoint of mill operation, it is important to use as much of the inventory as quickly and judiciously as possible.
When a steel manufacturer receives orders from customers, it is best to first consider the possibility of using existing inventory items for these orders, instead of producing them from the beginning. So, as shown in Figure 1, inventory application is performed as a preprocessing step to production planning. Orders that can be applied against existing inventory, either partially or completely, can be shipped to customers with appropriate additional processing.
The inventory application problem can be stated as a matching problem, where a set of orders from the order book is applied against an existing inventory. The goal of inventory application is to maximize the amount of inventory items applied against the order book, while minimizing the waste that might occur due to partial use of inventory items. Additional objectives emerge out of related business considerations and are outlined in the following section.