Int. J.

Production Economics 78 (2002) 255}270

An optimization model for re"nery production scheduling

Maud GoK the-Lundgren, Jan T. Lundgren*, Jan A. Persson
Department of Mathematics, Linko( ping University, Linko( ping, Sweden
Received 13 April 2000; accepted 25 September 2000

Abstract

In this paper we describe a production planning and scheduling problem in an oil re"nery company. The problem
concerns the planning and the utilization of a production process consisting of one distillation unit and two hydro-
treatment units. In the process crude oil is transformed to bitumen and naphthenic special oils. The aim of the scheduling
is to decide which mode of operation to use in each processing unit at each point in time, in order to satisfy the demand
while minimizing the production cost and taking storage capacities into account. The production cost includes costs for
changing mode and for holding inventory. We formulate a mixed integer linear programming model for the scheduling
problem. The model can be regarded as a generalized lot-sizing problem, where inventory capacities are considered and
more than one product is obtained for some modes of operation. A number of modi"cations and extensions of the model
are also discussed. It is shown how the optimization model can be used as a viable tool for supporting production
planning and scheduling at the re"nery, and that it is possible to analyze scheduling scenarios of realistic sizes. It is also
shown that the model can support shipment planning and strategic decisions concerning new products and investments
in storage capacity.  2002 Elsevier Science B.V. All rights reserved.

Keywords: Re"nery planning; Lot-sizing; Process scheduling; Optimization model

1. Introduction the products, the scheduling of the processing units,

We consider production planning at the NynaK s
oil re"nery in NynaK shamn, Sweden. The produc-
tion plant consists of one crude distillation unit and
two hydro-treatment units, where crude oil is distil-
lated and further processed and/or blended into
various oil products, such as bitumen, naphthenic
special oils and fuels. The production planning
includes the aggregated production planning decid-
ing where and when production should occur, the
shipment planning where customer demand is
transformed to schedules for the tankers transporting
* Corresponding author.
and "nally the realization of the plans and the
schedules with respect to the utilization of tanks
and pipes. In this paper we focus on the process
scheduling problem, i.e. on the question of how to
utilize the processing units in an optimal manner
given a speci"ed demand. The scheduling is strong-
ly related to the planning at the other levels, and it
a!ects many types of decisions in the company. The
ability to e$ciently construct high-quality (low-
cost) schedules is therefore crucial for the re"nery in
order to be competitive.
The scheduling problem concerns the question of
which mode of operation to use in each processing
unit at each point of time, in order to satisfy
the demand for a given set of products. A main

0925-5273/02/$ - see front matter  2002 Elsevier Science B.V. All rights reserved.
PII: S 0 9 2 5 - 5 2 7 3 ( 0 0 ) 0 0 1 6 2 - 6
256 M. Go( the-Lundgren et al. / Int. J. Production Economics 78 (2002) 255}270
characteristic of re"nery scheduling is that a set of
processing units concurrently produce multiple
products, and a product obtained as output from
one processing unit can be used as input to another
processing unit. A mode of operation for a process-
ing unit is speci"ed by the combination of products
consumed and produced in the process, and by the
yield levels for each of the products. Changeovers
between modes of operation cause disturbances
and extra costs to the production process. Hence,
long sequences of the same mode of operation (few
changeovers) are preferred. Long sequences imply,
however, larger inventory levels for some products
and an increased need for storage capacities (tanks)
with associated larger holding and capital costs.
We formulate a mixed integer linear program-
ming model for the re"nery scheduling problem.
The planning horizon is divided into a set of
discrete time periods, and the model concerns deci-
sions about which mode of operation to use in each
of these time periods for all processing units. The
objective is to minimize costs of changing modes
and costs of keeping inventories, given demands for
a set of products, storage capacities, and safety
stock levels. The optimization model can be re-
garded as a generalized lot-sizing problem, where
more than one product is obtained for some modes
of operation and where inventory capacities are
considered.
Not very much is reported in the literature
regarding the scheduling of operation modes in
re"neries using optimization models. One example
is given by [1], who used a mixed-integer linear
programming model to minimize the number of
changeovers between operation modes. In areas
related to scheduling of operation modes, optimiza-
tion models have been more frequently used.
Linear programming models have, for example,
been used for long-term aggregate production
planning (see [2,3]), and optimization models have
also been used for blending problems (see, for
example [3}5]). Other work related to the schedul-
ing of operation modes concern unloading and
blending of crude oil, feed management, and to
some extent tank and pipe management (see [6,7]).
An extensive review of problems and models within
the area of re"nery planning and scheduling is
given in [8].
The contribution of this paper is to show how
a re"nery scheduling problem can be formulated
using an optimization model, and that it is possible
to solve and analyze scheduling scenarios of realis-
tic sizes. We show that the optimization model can
be used as a viable tool for supporting production
scheduling at the re"nery, and also to support the
shipment planning and strategic decisions con-
cerning new products and investments in storage
capacity.
In Section 2 we describe the production process,
and in Section 3 we describe the production plann-
ing and scheduling situation at the re"nery. Then,
in Section 4, the optimization model for the sched-
uling problem is presented. Section 5 includes
a number of extensions of the model, and in Section
6 we describe the implementation of the model at
the company. Finally, Section 7 includes examples
of analysis that can be performed by the use of the
model.
2. The production process
The production process at the NynaK s re"nery
consists of three processing units; the crude distilla-
tion unit (CDU) which transform crude oil into
naphtha, distillates and bitumen, and two hydro-
treatment processes which transform distillates
into naphthenic special oils. The production
process is illustrated in Fig. 1. The CDU concur-
rently produces one bitumen product, four di!erent
distillates, and some naphtha by using approxim-
ately 4500 tons of crude oil each day (24 hours).
Since the CDU is operated using di!erent modes of
operation, a total of two bitumen base products
and about "ve di!erent distillates are produced at
the re"nery. The two base bitumen products can be
blended into about "ve di!erent bitumen products.
Most of the distillates produced (or imported to the
re"nery) are further processed in the hydro-treat-
ment process, where hydrogen is added in order to
obtain the desired characteristics of the naphthenic
special oils. The hydro-treatment is performed in
two separate units denoted by HT (heavy hydro-
treatment) and HF (light hydro-treatment). A third
unit, called HT2, which equals HT in terms of
capacity and characteristics, is planned for. The
 M. Go( the-Lundgren et al. / Int. J. Production Economics 78 (2002) 255}270
Fig. 1. A schematic picture of the production process at NynaK s.
naphthenic oil base products are blended into
a large set of di!erent naphthenic special oil prod-
ucts. The naphtha obtained from the CDU is sold
as fuel.
The crude oil consists of an immense number of
di!erent hydrocarbons, and it is injected into the
bottom of the CDU. Here, the temperature is very
high and all the hydrocarbons except for the
heaviest ones are transformed into gas. Higher up
in the CDU the temperature is lower, and since the
hydrocarbons di!er with respect to their boiling
temperatures, they are transformed back to liquid
at di!erent places of the CDU. The output from the
CDU consists at the bottom of bitumen, which is
the remains of hydrocarbons that have not been
transformed into gas. Higher up in the CDU four
distillates and a top fraction consisting of naphtha
are obtained.
The characteristics of the distillate fractions are
controlled by where the cuts are placed on the
temperature scale, i.e. the characteristics are con-
trolled by the range of the boiling temperatures for
the hydrocarbons included in each distillate frac-
tion. The placing of these cuts is de"ned by the so
called run-modes, or modes of operation. The run-
modes di!er mostly in the positioning of the cuts,
but may also di!er with respect to the type of crude
257
oil that is used and at what rate the CDU is fed.
Sometimes, a run-mode may de"ne the use of a dis-
tillate which is blended into the crude oil and fed to
the CDU. Normally, the modes are de"ned such
that the yield of the second distillate (from the top
of the CDU) is as high as possible, since this distil-
late can be further processed into a high-value
naphthenic special oil. A total of about 10 run-
modes are normally used for the CDU.
There are some problems associated with the
change from one run-mode of the CDU to another.
The CDU needs time to stabilize under the new
operating conditions, and the characteristics of the
products obtained are therefore uncertain and #uc-
tuating for 1}2 hours after a changeover. During
this period the distillates often have to be degraded
to fuel products of lower sales values. Because of
this downgrading, the production capacity of high-
value distillates is reduced by frequent changeovers.
The production of bitumen is less sensitive to
changeover #uctuations. Sometimes the distillation
process has to be shut down, for example due to
major disturbances or simply due to low demand
during the winter. Then, extra energy is required in
the warm up stage of the following start-up of the
distillation unit, and the distillates obtained are of
lower quality until the process has stabilized after
258 M. Go( the-Lundgren et al. / Int. J. Production Economics 78 (2002) 255}270

some 12 hours. If possible, it is therefore often 3. Production planning and scheduling

better to decrease the production rate for some time
(can be done down to 50% of the maximum rate), The planning and scheduling of the production
than to run intermittent production. process at the NynaK s re"neries is carried out
There are 10}15 possible run-modes in the two sequentially, as illustrated in Fig. 2.
hydro-treatment units (HF and HT). A run-mode At the top level, we have the aggregated produc-
represents the consumption of a particular distillate tion planning. Based on forecasted aggregated
and the production of a particular naphthenic demand at depots and customer areas, the aim of
special oil, i.e. the run-mode de"nes the input and the planning is to decide which products should
output of the process. The choices of run-modes in be produced where and when. In this planning step
the two hydro-treatment units are restricted by the the transportation #ows, the inventory levels, and
limited capacity of the hydrogen generating unit, the quantities of crude oil to be bought, are also
and by the capacity of removing sulphur from the considered.
hydro-treatment units. For the production planning step NynaK s uses
A change of run-modes in the two hydro-treat- a linear programming (LP) model which describes
ment units is associated with some negative e!ects. the production and transportation during each
This is due to the need of downgrading the prod- month for the next 12 months. The LP-model
ucts produced during approximately the "rst includes representation of the re"neries, the depots,
4 hours after a changeover. This negative e!ect is the customer areas, and transportation possibili-
kept low when switches are made between products ties. The output from the model is production and
that have small di!erences in viscosity. transportation requirements for each month. The
NynaK s has at their disposal some 300 oil tanks of model uses the concept of run-modes in order to
various sizes for storing components and "nal describe the transformation of crude oil into prod-
products. The tanks used for storing bitumen are ucts demanded at depots or customer areas. The
heated, otherwise the bitumen cannot be pumped. planning is revised every second month. The LP-
Some tanks are always used for the same product, model is used to evaluate and analyze di!erent
whereas other tanks are so called multipurpose scenarios concerning changes in demand structure,
tanks where the stored products can change from production capacities, di!erent crude oils, new
one period to another. The products are trans-
ported in a large network of pipelines. The network
of pipes and tanks may restrict the production (the
choice of run-modes to be utilized) somewhat. For
example, it is not possible to "ll a tank from the
CDU and at the same time feed HT or HF with
a distillate from the same tank.
The bitumen products are stored in two main
qualities and also in a few blended qualities.
NynaK s owns two tankers that are used for deliver-
ing bitumen to eight depots located along the
Swedish coast or directly to depots and customers
abroad. Fuel products are normally not kept
in stock, but are delivered to the re"nery in
Gothenburg or sold directly to customers. The
naphthenic oil products are blended from a set of
naphthenic oil base products before they are
distributed (usually by boat) from the re"nery.
Hence, a lot of tanks are needed for the blending of
naphthenic oils. Fig. 2. The planning levels at NynaK s re"nery.
 M. Go( the-Lundgren et al. / Int. J. Production Economics 78 (2002) 255}270
product groups, storage capacities, location of de-
pots etc. Di!erent scenarios for the load capacities
at the wharfs can also be evaluated, since
the throughput of the re"nery is to a large extent
proportional to the load at the wharfs.
We believe that the aggregate production plann-
ing is performed satisfactory with help of the LP-
model. There are however some types of analyses
which can be improved. The "rst concerns the
relation between the production levels (throughput)
at a re"nery, and the storage capacities needed. If
the production is frequently changed between run-
modes (short sequences of the same run-mode), less
storage capacity is needed for the components and
products since the demand can be met at almost
every point in time. However, if mainly long
sequences of the same run-mode are used, the stor-
age capacity needs to be larger. The lengths of the
run-modes, in turn, are related to the frequency of
changeovers between run-modes. Thus, there is
a trade-o! between the negative e!ects of frequent
changeovers (start-up costs) and the costs of keep-
ing large inventory levels (storage and capital
costs). It is also di$cult to estimate the cost
implications for introducing a new product (or
product group) by only using the LP-model. The
production of a new product may appear `too
favorablea when the e!ects of the required change-
overs in the production process are not considered.
The next planning level concerns the shipment
planning. This planning converts the aggregated
forecasted demand at customer areas and depots
assigned to the re"nery into shipment requirements
for the deliveries of bitumen and naphthenic prod-
ucts. Based on forecasts of the customer demand,
the current inventory levels at the re"nery, and at
the depots, a plan for the tankers detailed by day
can be created. The aim is to satisfy demand while
not violating the inventory levels. It is important
that the shipment plan is feasible with respect to the
production process. The shipment plan is currently
developed in a spreadsheet environment, and no
optimization decision tools are utilized.
The shipment plan for the bitumen products is
developed in an iterative manner together with
Nyship, the operator of the NynaK s bitumen tankers.
It has a time horizon of at least one month, and it is
updated each week. The seasonality of demand for
259
bitumen has to be accounted for, i.e. the inventory
levels should be high at the beginning of peak
season (spring), and low at the beginning of the
o!-peak season (fall). For the delivery of naph-
thenic products two chartered tankers are used
which normally are operated using the same cyclic
schedule. Additionally, extra transportation capa-
city is hired when needed. Fuel products are not
really considered at this planning stage, since the
transportation of fuels is mostly dependent on the
operation of the re"nery.
Unfortunately, information about future de-
mand of bitumen and naphthenic oils given by
customers is often incomplete. It is therefore quite
di$cult to devise a shipment plan, at least for
bitumen, that will actually hold. Further, the ship-
ment plan may not hold because of disturbances in
the ship schedules. A tanker can for example
break-down or be delayed. This stresses the need
for a decision support tool which helps the planner
to carry out the frequent re-planning tasks.
The shipment plan needs to be realizable in terms
of production, and it is important to make a cross-
checking between the shipment plan and the corre-
sponding production schedule to make sure that
the products can be produced in due time. A main
di$culty for the planners of the shipments and the
production process is how to devise a shipment
plan and a production schedule which complement
each other well. In particular, it should be desirable
to be able to evaluate the overall e!ect of making
changes in one of the plans. We believe, there is
a strong potential in creating an optimization
model which can help to answer whether a ship-
ment plan can be met in terms of production or not.
The ultimate goal is to have a model which can
devise a shipment plan, meeting both the produc-
tion and demand requirements at an overall low
cost.
The third level of planning concerns the process
scheduling of the processing units. The scheduling
aims primarily at meeting the planned deliveries
from the re"nery (the shipment plan). The crude
distillation unit and the two hydro-treatment pro-
cessing units are scheduled sequentially, starting
with the hydro-treatment units, and the planning
is made by di!erent employees. A processing sched-
ule de"nes what products to produce and what
260 M. Go( the-Lundgren et al. / Int. J. Production Economics 78 (2002) 255}270
products should be consumed at each point in time
(day) for the next month and, hence, it de"nes
which run-mode to use and when to perform
changeovers. Re-scheduling is normally done every
week.
A schedule of the hydro-treatment processes is
established by using information about the ship-
ment plan of naphthenic products and the current
inventory levels. It is assumed that the required
distillates will be available from the CDU at the
time the distillate is scheduled for hydro-treatment.
However, some consideration is taken as to
whether this is a reasonable assumption or not. The
planner also needs to avoid schedules which
include switches between production of the most
di!erent naphthenic oils in terms of viscosity.
The primary aim of the scheduling of the CDU is to
meet the planned deliveries of bitumen and the
derived demand of distillates for hydro-treatment,
i.e. the schedules of HT and HF, while not violating
the upper and lower requirements on inventory
levels of the products. The secondary aim is to
reduce the number of changeovers and, if possible,
to produce `valuablea products for storage. The
quality of the production schedules is highly depen-
dent on the outcome of the previous planning steps.
A poor shipment plan may very well give require-
ments for the process schedules which result in
costly schedules, or in requirements which cannot
even be met.
Currently, the scheduling is carried out manually
with help of spreadsheet models, and it is a very
time consuming exercise. No optimization tools are
used for the scheduling. The need for some support-
ing optimization tool for the scheduling is accen-
tuated by the frequent changes in the planning
situation. For example, the shipment plan may
change since it is based on forecasts of demand, and
since tankers may be delayed. Whenever a change
occurs in the shipment plan, a rescheduling of the
processing units may need to be carried out. An
optimization tool can also be used to give estimates
of the change of the production cost for altering the
schedule in order to meet a customer's late enquiry
about a shipment. This cost depends mainly on the
current situation, and the cost can be high if it is
necessary to make costly changeovers in order to
meet an altered shipment plan.
The forth planning level is the execution of the
production schedules created for the distillation
and the hydro-treatment processing units. The ex-
ecution concerns decisions about the "ne tuning of
the processing units, which tanks to utilize for the
storage of the components and products, how to
use pump and pipes e$ciently, and which tanks to
utilize to blend the components into products in
order to achieve an e$cient loading of the tankers.
The arrival of the ships also needs to be planned.
Even though there is an established shipment plan
the tankers may arrive di!erently compared to the
order anticipated. Consequently, there are short-
term decisions to be made as to which tanker
should be served "rst, and also, what quay to utilize
for the loading of a particular tanker.
At this planning level, the decisions are often
made when needed and few plans are created be-
forehand to support the decisions. The potential
use of optimization models is therefore limited. For
the utilization of the tanks it may be possible to use
a production scheduling model where constraints
forbidding some production combination of run-
modes are included. In this way the production will
be directed towards the use of run-modes which are
favorable for the utilization of the tanks.
In the execution of the production schedule the
blending of the end-products has to be considered.
Currently, optimization models in spreadsheets are
utilized. These models minimize the total value of
the products consumed according to `pricesa speci-
"ed by the user based on experience of which
product one usually runs short of. A potential for
improvement is to compute these prices by using
information from the current LP-model. The
planning and sequencing of the blending tasks may
also be improved, possibly leading to a reduced
need of storage capacity and to smaller quantities
of downgraded products.
From the analysis of the planning and scheduling
process at the NynaK s re"nery we conclude that the
planning may be improved by the use of an optim-
ization-based decision support tool. We suggest to
use an optimization model for the production
scheduling of the three processing units. This model
is presented in the next section. The model is driven
by the shipment plan and accounts for the trade-
o!s between costs of changing run-modes and costs
 M. Go( the-Lundgren et al. / Int. J. Production Economics 78 (2002) 255}270
of keeping inventories. We believe that this
model can be useful for analysis and decision
support at all the described planning levels at
NynaK s. One potential use of the scheduling model
is for the daily operational planning of the process-
ing units, as a support to the scheduler in the task
of creating a good production schedule. The
model considers simultaneously the scheduling
of the distillation unit and the hydro-treatment
units. The model can be used to evaluate whether
a suggested shipment plan is feasible or not, to
evaluate the production cost incurred by a par-
ticular shipment plan, and to support decisions
on whether a shipment plan should be changed
or not. Of great importance is also the possibilities
of analyzing many scenarios and to be able to
make fast evaluations of the consequences of
sudden changes in the shipment plans. Further,
the model can support strategic decisions concern-
ing investments in storage capacities and introduc-
tion of new products, since it can describe the
relation between production (changeover) cost
and changes in storage capacity and demand
structure.
4. Model formulation
In this section we present the mathematical
formulation of the production scheduling problem
at the NynaK s re"nery. We will formulate the
model using general notation, which shows on the
possibility of using the model for general re"nery
production scheduling.
We make a time-discretization of the planning
period, and denote the set of time periods by . In
the NynaK s case the length of one period is 24 hours,
and the planning period (number of time periods) is
31 days (in some cases 60 days). The lengths of the
time periods are equal during the whole planning
horizon (uniform time discretization). However,
one may use non-uniform time discretization with-
out making any major changes to the model. The
"rst time periods can for example be shorter, rep-
resenting the near future in more detail. This is
especially suitable when using a rolling time hor-
izon strategy, implying that only the "rst part of the
schedule is implemented.
261
The set of processing units is denoted by Q, and
in the NynaK s case this set includes the CDU and the
two hydro-treatment units. Each of the three
processing units can be run in 5}10 di!erent
run-modes. The set of possible run-modes at pro-
cessing unit q, q3Q, is denoted by M , and the
O
union of all possible run-modes at all processing
units is denoted by M. In each unit, only one
run-mode can be used in each time period, and the
run-mode is always used during the whole length of
the period. This means that the time a given run-
mode is used is always a multiple of the length of
a time period. Normally changes of run-modes are
made at the same time each day, but changes can be
made at any point in time. An example of a model
allowing this is given in the Section 5. It is of course
always possible to de"ne shorter lengths of the time
periods, thereby allowing for a more detailed time
representation.
Let P denote the set of products and components
(including crude oil), and let d denote the demand
NR
of product p in period t. The demand may be
negative if it represents a delivery of the product to
the re"nery (crude oil or imported components).
The demand for end products is given from the
shipment plan, and it is a derived demand from an
aggregation of customer demand into a set of base
products.
The main decision variable in the model is y ,
KR
de"ned as one if run-mode m is used in time period
t, and zero otherwise. Given the sequence of run-
modes over time for a processing unit, i.e. given the
values of the y variables, it follows which quantit-
KR
ies that are produced and consumed in each time
period. Let x and z denote the variables for
NR NR
production and consumption, respectively, of prod-
uct p in period t. These variables are related to the
run-mode variables through the production and
consumption yield of product p when operating
run-mode m. Let a denote the production yield
NK
and let b denote the consumption yield. The
NK
production and consumption yields are by de"ni-
tion non-negative, and these coe$cients can be
used to represent di!erent yield levels. Further, the
inventory level I of product p at the end of period
NR
t can be computed for all products in each of the
time periods using inventory balancing constraints.
The initial state of production (initial run-mode),
262 M. Go( the-Lundgren et al. / Int. J. Production Economics 78 (2002) 255}270

y , and the initial inventory levels at the beginning The following mixed integer linear programming
K
of the planning horizon, I , are assumed to be model for the production scheduling problem can
N
given. now be formulated.
The inventory cost for product p in period t
is denoted by c' , and this cost is associated with [SCH]
NR
the capital cost for the product in inventory and for min c' I # cQ s , (1a)
the storage equipments (e.g. tanks), and with the NR NR KR KR
RZ2 NZ. RZ2 OZ/ KZ+O
maintenance costs of the equipment used. The in- s.t.
ventory cost of a product is assumed to be propor-
x ! a y "0, p3P, t3,
tional to the quantity of the product kept in NR NK KR
inventory. OZ/ KZ+O
The changeover cost is associated with the nega- (1b)
tive e!ects of changing modes, such as necessary z ! b y "0, p3P, t3,
downgrading of products and need for extra NR NK KR
OZ/ KZ+O
manpower due to the required monitoring of (1c)
the process and the possible actions which might
need to be taken. The production capacity (per time I #x !z !d "I , p3P, t3,
NR\ NR NR NR NR
unit) of the process unit is also reduced, but this loss
(1d)
of capacity is not included explicitly in the model.
It is taken into consideration by slightly reducing I )I )IM , p3P, t3, (1e)
the production yield of the run-modes in the M NR NR NR
model. Instead of de"ning a changeover cost y "1, q3Q, t3, (1f )
KR
for each pair of modes we de"ne cQ as the start- KZ+O
KR
up cost of run-mode m in period t. This cost y #s *y , m3M, t3, (1g)
KR\ KR KR
is incurred whenever a new operation mode is
I , x , z *0, p3P, t3, (1h)
initiated. This means that we assume the change- NR NR NR
over cost to be sequence independent. In order y , s 3
0, 1, m3M, t3. (1i)
to use the start-up cost we need to de"ne a vari- KR KR
able s , which is one if run-mode m is started in The objective function (1a) expresses the total pro-
KR
period t, and zero otherwise. The possibility of duction scheduling cost composed by the inventory
temporarily stopping a processing unit is modeled cost and the cost of performing the start-ups. Con-
by de"ning a stop-mode. The negative e!ects straints (1b) and (1c) relate the usage of a run-mode
associated with the restart of the unit (warm-up, with the quantity produced and consumed, respec-
extra long period of downgrading, extra energy) tively, of the products. Note that these constraints
are represented by a cost of starting the stop run- allow a product to be produced or consumed at
mode. multiple processing units. Constraints (1d) are the
For each product and time period we specify the inventory balancing constraints, and the con-
available storage capacity, denoted by IM . This straints (1e) specify the restrictions on the maximal
NR
capacity is de"ned as the total capacity of the tanks and the minimal inventory levels of the products.
normally used for the product. We do not consider Only one run-mode can be used at a given point in
each tank explicitly. The storage capacities of tanks time for each processing unit, and this is ensured by
in which di!erent products can be stored (multipur- constraints (1f). Whenever there is a change of the
pose tanks) are added to the inventory capacities of run-mode, the corresponding variable s is forced
KR
the individual products. In addition to the upper to take the value one. This is achieved with con-
bounds on the inventory levels, we have lower straints (1g). The model allows variable s to take
KR
bounds on the inventory levels, denoted by I , the value one also when the corresponding variable
representing requirements on safety stock levels for M NR y equals zero. However, since the cost-coe$cient
KR
product p in period t. cQ is positive this will never be the case in any
KR
 M. Go( the-Lundgren et al. / Int. J. Production Economics 78 (2002) 255}270 263

optimal solution to the model [SCH]. The integer levels, which are imposed by constraints (1e), do not
requirement on s can be relaxed, since for any appear to have been investigated previously in
KR
partial solution in the variables y it follows that lot-sizing models.
KR
s is equal to 0 or 1 for all m and t.
KR
The model [SCH] can be interpreted as a gener-
alization of a lot-sizing problem. For an extensive 5. Extensions of the model
review of lot-sizing problems and solution
methods, see [9,10]. The basic characteristics of The proposed production scheduling model
a lot-sizing problem are that production can occur [SCH] can be extended to possibly better describe
in a set of discrete time periods, and if production the production problem. In this section we formu-
does occur a "xed set-up cost is incurred in addi- late a number of modi"cations of the basic model.
tion to the production cost proportional to the
produced quantity. Further, if there was no set-up
in the previous time period, a start-up cost may be 5.1. Variable length of the run-modes
incurred. In most lot-sizing problems inventory
costs are considered. Hence, there is a trade-o! In the basic model, we assume that start-ups of
between proportional production costs, set-up new run-modes occur at the same time each day
costs, start-up costs, and costs of keeping invento- (time period) and, hence, the time a given run-mode
ries. In the model [SCH] we only consider start-up is used is always an integer number of days. It is
costs and inventory costs. However, without loss of however possible to extend the model to allow
generality, we can introduce the other types of costs a change of run-mode to occur at any point in time
into the model. within the time period. This is done by allowing
Since we consider multiple products, production a start-up to be delayed up to one time period. For
this extension we need new variables, f > and f \ ,
capacities and start-up costs, the model [SCH] is KR KR
similar to the multi-item capacitated lot-sizing denoting the extra and reduced usage, respectively,
problem with start-up costs, studied by [11]. The of run-mode m in period t. A positive value of
f > means that production with run-mode m is
proposed model, however, has a number of addi- KR
tional characteristics. First, it has an all-or-nothing extended to partly occur also in time period t#1,
characteristic meaning that production (or con- where another run-mode, say m( , is started. Conse-
quently, variable f \( will have a corresponding
sumption) can only be at zero-level or at the capa- KR>
city level (a or b ), which is expressed by the positive value, representing the reduced production
NK NK of run-mode m( .
equality requirements in constraints (1b) and (1c).
Further, the products (or components) considered Equalities (1b) and (1c) can be modi"ed accord-
can be both produced and consumed, which makes ing to
it a multi-level (multi-stage) problem. We need to
x ! a (y #f > !f \ )"0,
consider not only the product structure but also the NR NK KR KR\ KR
structure of the production facility, e.g. what di!er- OZ/ KZ+O
ent run-modes that can be utilized simultaneously. p3P, t3, (2)
Constraints (1f) ensure that only one run-mode can
be used in each processing unit and in each time z ! b (y #f > !f \ )"0,
NR NK KR KR\ KR
period. In a general multi-stage lot-sizing model, OZ/ KZ+O
simultaneous production of di!erent products is p3P, t3, (3)
allowed, which is also the case for the model
[SCH]. Additionally, in [SCH] the production of accounting for the extra or reduced production in
one product may `forcea the production of one (or a time period. In addition, we have to add the
several) other products. This is due to the usage constraints
of some run-modes representing the production of
several products. Upper limits on the inventory f > )y , m3M, t3, (4)
KR KR
264 M. Go( the-Lundgren et al. / Int. J. Production Economics 78 (2002) 255}270
specifying that we can let the production of a run-
mode extend to the next period only if it is used for
production in period t. Further, constraints
f \ )s , m3M, t3,
KR KR
ensure that we can reduce (delay) the production of
run-mode m only if this run-mode is started in
period t. Finally, we have to add constraints
f > ! f \ "0, q3Q, t3,
KR\ KR
KZ+O KZ+O
which ensure that the extra production in time
period t!1 equals the reduction of the production
in time period t.
The extended model allowing for variable length
of the run-modes includes more variables and more
constraints compared to the basic model [SCH]. It
is therefore reasonable to expect that the solution
time will increase. Our computational studies show
that the required time for solving a linear relax-
ation of the model is increased with a factor of
between 4 and 10. The same increase in solution
time can be observed when using a branch and
bound solution approach for the integer program.
The use of this extended model is analyzed in
Section 6.
5.2. Variable yield levels
In the basic production scheduling model
[SCH], it is assumed that production can occur
only at the capacity given by the yield a . This is
NK
enforced by constraints (1b) and (1c) together with
the binary requirements on the variables y . How-
KR
ever, at the NynaK s re"nery one may reduce the
production yield to approximately 50% of the
maximal yield represented by a . The reduction
NK
and increase of the production yields can be
modeled by including run-modes with production
and consumption at di!erent, but the same relative
yield levels. This may, however, lead to relatively
many run-modes and it also implies that a start-up
cost is introduced when the yield level is changed
within the same run-mode. This is not correct in
practice.
Instead, we introduce an alternative formulation
where we may use a run-mode between a speci"ed
minimum yield level and its maximal yield. We
introduce the variable q , de"ned as the share of
KR
the maximal yield level for run-mode m in period t,
and we de"ne r as the minimum share allowed for
(5) K
run-mode m. We can now replace constraints (1b)
and (1c) of the SCH-model by
x ! a q "0, p3P, t3, (7)
NR NK KR
OZ/ KZ+O
z ! b q "0, p3P, t3, (8)
(6) NR NK KR
OZ/ KZ+O
r y )q )y , m3M, t3, (9)
K KR KR KR
q *0, m3M, t3. (10)
KR
The extended formulation, allowing for continuous
set-ups, includes an increased number of variables
and constraints. Our computational studies, how-
ever, show that the solution time does not increase
compared to the solution time for the original
model. This is the case both when solving the linear
relaxation and when using a branch and bound
solution strategy. The characteristics of the sched-
ules obtained when using this extended formulation
are presented in Section 6.
5.3. Tank capacities
In model [SCH] the capacities of the tanks are
not modeled individually. Instead, the inventory
capacities are speci"ed for each product at an ag-
gregated level. We can re"ne the basic model by
de"ning two types of inventory capacities. The "rst
type is the aggregated inventory capacities of tanks
that are dedicated for storing the product. This
capacity is given by IM . The second type is the
NR
inventory capacities of the tanks that can be used
for storing several products (multipurpose tanks).
For products that can be stored in multipurpose
tanks we now introduce some new variables. Let
IC be the quantity of product p that is stored in
NR
a multipurpose tank in period t. Then, constraints
(le) in [SCH] can be replaced by
I )I )IM #IC , p3P, t3. (11)
 NR NR NR NR
The new variables IC can be included in the objec-
NR
tive function with corresponding cost coe$cients,
representing the extra cost of using multipurpose
tanks instead of dedicated tanks.
 M. Go( the-Lundgren et al. / Int. J. Production Economics 78 (2002) 255}270
The overall capacity of multipurpose tanks in
period t is de"ned as IM C, and we have to add con-
R R\
straints for the inventory capacity of multipurpose
tanks according to
IC )IM C, t3. (12)
NR R the upper limits on the inventory levels IM . Results
NZ.
The modi"ed constraints (11) and the new con-
straints (12) result in an extended model with
more constraints and variables. No computa-
tional tests have been carried out in order to evalu-
ate the solution performance of this extended
model.
5.4. Robustness of schedules
A major source of uncertainty in the produc-
tion scheduling is when the tank boats actually
arrive to the re"nery. The tankers are often served
on a "rst-come-"rst-served basis, where the arrivals
may deviate slightly from the date speci"ed by the
shipment plan. A robust schedule may be regarded
as a production schedule which ensures that the
products are available a few time periods earlier
than the expected date of shipment. A schedule can
be said to be robust also if one can deliver the
products a few days later than expected without
having to reschedule the production due to lack of
inventory capacity.
The issue of robustness of the schedule with
respect to early arrival of tankers can, to some
extent, be taken into consideration in the model by
increasing the lower levels of inventory capacity
(safety stock requirements) in the periods prior to
the planned shipment period. The constraints
become,
R>0
I # d K )I , p3P, t3
1,2, (!R),
 NR NR NR
RK R>
(13)
where R is the number of time periods prior to t,
when product p is available for shipment.
Analogously, constraints can be formulated
making sure that there is storage capacity available
for the products even though shipments are delayed.
265
The constraints becomes
I )IM ! d K , p3P, t3
(1#R),2, ,
NR NR NR
RK R\0
(14)
and they can be interpreted as a way of modifying
NR
from computational tests using constraints of type
(13) and (14) are presented in Section 6.
5.5. Restrictions on the production
The choice of which run-modes that concurrent-
ly can be used at the di!erent processing units may
be restricted by the need of a common resource.
For example, the run-modes of the hydro treatment
processing units have di!erent needs for hydrogen,
and the capacity of generating hydrogen is not
large enough to support all combinations of run-
modes. The same problem also occurs with respect
to the capacity of dealing with sulphur, which is an
output from the hydro-treatment processes. This
type of constraints on the production can be
modeled by the constraints
g y )AM , r3R, t3, (15)
KP KR P
KZ+
where g represents the use of resource r when
KP
using run-mode m, and AM denotes the available
P
resource of type r.
Further, it may not be possible to use certain
combinations of run-modes in the di!erent process-
ing units in the same time period due to other
reasons. For example, at NynaK s it is not possible to
produce a distillate in the CDU and then feed it
directly (in the same period) into HF or HT. It is
not even possible to do this using a dedicated tank
for bu!ering, since it is not possible to, simulta-
neously, pump to and from a tank. Restrictions on
what run-modes that can be used in the same time
period can easily be added to take such things into
account.
When a change is made from one run-mode to
another, some production capacity is lost in the
processing unit due to downgrading of some prod-
ucts. This can be interpreted as a required start-up
time where no production can occur, and the prod-
ucts obtained during the start-up period can be
266 M. Go( the-Lundgren et al. / Int. J. Production Economics 78 (2002) 255}270
ignored for planning purposes. In the model [SCH]
this downgrading is to some extent considered by
slightly reducing the yield of production (a ). The
NK
loss of production capacity can be modeled ex-
plicitly by replacing the constraints (1b) with the
equalities
x ! a y #  s "0,
NR NK KR NK KR
OZ/ KZ+O OZ/ KZ+O
p3P, t3, (16)
where  )a is de"ned as the reduced produc-
NK NK
tion of product p due to a start-up of run-mode m.
The downgrading e!ect of a start-up may vary
depending on which run-modes the production is
switched between. This can be accounted for by
including changeover variables for each pair of
run-modes. Then by incurring an extra cost for
unfavorable changeovers or by incurring a reduc-
tion of the production yield using the same
principles as those used in constraints (16),
sequence-dependent changeovers can be included
in the model.
6. Implementation and use of the model
In this section we present a number of computa-
tional tests and analyses of the proposed scheduling
model [SCH]. The computational tests are made
on a set of scenarios representing real life schedul-
ing situations at NynaK s. The purpose of the tests is
to show that it is possible to use the model in
practical planning situations, and to illustrate what
kind of analyses are possible to make with the
model. In the following, we "rst describe the scen-
arios, the solution methods used, and the environ-
ment at NynaK s where the model was implemented
and tested. Then, we describe the use of the model
to obtain good production schedules and to make
strategic analyses. Results from the use of some of
the extended models are also presented.
Three scenarios of di!erent sizes were created.
Scenario 1 and Scenario 2 are based on a schedul-
ing situation at NynaK s covering one month, while
Scenario 3 covers two months. Scenario 1 includes
fewer products than the two other scenarios. Basic
characteristics of the three scenarios are given in
Table 1
Characteristics of the test scenarios
Characteristics Scenario 1 Scenario 2 Scenario 3
Products 13 23 24
Run-modes 14 23 23
Time periods 31 31 61
Binary variables 434 713 1401
Continuous variables 1643 2852 5795
Constraints 2139 3658 7503
Table 1. In the number of Products we include both
crude oil, intermediate products (components) and
end-products. The number of Run-modes includes
both production modes and stop-modes of all the
three processing units. A stop-mode is a run-mode
with zero production and consumption. Further,
Table 1 shows the number of variables and con-
straints in the mathematical formulation of the
model [SCH]. No integer requirements are speci-
"ed for the variables s (see Section 4).
KR
The inventory cost (c' ) is computed based on the
NR
capital tied in the products and on the cost of
keeping the storage capacities (e.g. maintenance of
tanks). The inventory holding cost of crude oil is set
to zero, which will cause production to occur `as
late as possiblea. The start-up costs used (cQ ) are
KR
based on the lost value of products due to down-
grading. The start-up costs are equal for all
run-modes, including the stop-modes. Thus, when
stopping and later restarting a processing unit,
a cost is incurred which is two times as large as for
the case of changing run-mode without an inter-
mediate stop. This mimics the extra costs which are
associated with the start-up of a processing unit
which temporarily has not been used for produc-
tion. The aggregated demand roughly equals the
aggregated production capacity during the con-
sidered time horizon. The initial inventory levels
correspond to 50% of the storage capacities.
Two di!erent solution approaches have been de-
veloped and explored for "nding optimal and
near-optimal solutions of the production schedul-
ing problem. Firstly, we use the MILP-solver
(Mixed Integer Linear Programming) CPLEX,
version 5.0, which is based on a branch and
bound solution procedure. In order to reduce the
 M. Go( the-Lundgren et al. / Int. J. Production Economics 78 (2002) 255}270
computational time when the scheduling problem
is solved by CPLEX, we initially add so-called valid
inequalities to the model [SCH]. Valid inequalities
improve the linear programming bound of the
model [SCH], and, thereby, decrease the number of
solutions which are enumerated by the branch-
and-bound procedure. For details on this solution
approach we refer [12].
The second solution approach is based on a tabu
search heuristic. Since it is a heuristic, a basic prop-
erty of this solution method is that it cannot
guarantee optimality for the schedules provided.
Instead, the advantage of the method is that it
generates good feasible schedules within a relative-
ly short time. The tabu search can essentially be
regarded as a re"ned neighborhood (descent)
search heuristic, in which the de"nition of the
neighborhood may vary and in which local deterio-
ration of the objective function value is allowed.
The origin of tabu search dates back to the early
years of the 1970s, and the tabu search of the form
we know today was introduced in the late 1980s.
For a general description of tabu search, see
[13,14]. The speci"c tabu search applied for the
scheduling problem at NynaK s is further described in
[8].
Next, we report on some general results concern-
ing the computational times which are required in
order to generate schedules for the di!erent scen-
arios by the two solution approaches. For Scenario
1 we obtained an optimal schedule within three
CPU-hours by the use of valid inequalities and
CPLEX (on a Sun Ultra Sparc 170E). For Scenario
2 and Scenario 3 we were not able to generate
optimal schedules within eight CPU-hours, which
was set as an upper limit on the computational
time. We were, however, able to obtain feasible
solutions that were within 10% of the optimal
objective function value. The tabu search heuristic
generated reasonable good schedules for all three
scenarios within 5}15 minutes of CPU-time. By the
use of CPLEX we could verify that these schedules
were near-optimal, in the sense that the total cost of
these schedules deviated from the optimal cost not
more than 6% for Scenario 2 and 7% for Scen-
ario 3. Our conclusion is therefore that the tabu
search heuristic is to be preferred when the produc-
tion scheduling model is used in practice.
267
A prototype scheduling tool, including a version
of the tabu search heuristic, has been installed at
NynaK s. The scheduling tool consists of an Excel
workbook with associated Visual Basic code for the
data handling, i.e. for the preparation of scheduling
scenarios and analysis of the schedules. The Visual
Basic code extracts the user manipulated data from
the Excel workbook and produces the data "les
required by the tabu search procedure, which was
implemented using the C-programming language.
The prototype runs on a PC under the Microsoft
Windows environment. The user can easily modify
the scheduling scenario; products or run-modes
can, for example, be added or removed by starting
Visual Basic macros in the Excel workbook. The
prototype can visualize e!ects of making manually
changes to a schedule obtained from the model,
since the Excel workbook contains formulas for
computing costs and inventory levels for any sugges-
ted schedule. Hence, the user can analyze a schedule
obtained from the tabu search heuristic, modify the
schedule, study the consequences, suggest new cha-
nges of the schedule or changes in the given scenario
(for example in the shipment plan), and then &re-
optimize' the schedule using the tabu search heuristic.
Schedules obtained for Scenario 3 have been
studied in detail by the planners. One experience
was that the schedules obtained sometimes sugges-
ted combinations of run-modes for the di!erent
processing units, which in practice were not feasible
with respect to the capacity of producing hydrogen
and removing sulphur. Hence, these schedules had
to be changed to avoid such combinations. It was
possible to modify the tabu search heuristic and
punish schedules utilizing more resources than
available, and thereby obtain feasible schedules.
Some schedules also suggested changes between
run-modes with large sequence dependent costs. In
order to avoid such changeovers, sequence depen-
dent cost components were included in the tabu
search heuristic. Further, it was noted that some
schedules used the zero production run-mode quite
frequently. However, since it is reasonable to as-
sume that some products can always be sold in the
market with pro"t, production of such products
should be allowed. This was considered in the tabu
search heuristic by giving the run-modes producing
such products a negative cost.
268 M. Go( the-Lundgren et al. / Int. J. Production Economics 78 (2002) 255}270
After these modi"cations of the tabu search heu-
ristic, the schedules obtained from the prototype
scheduling tool looked fairly similar to the ones
actually used during the studied period. The sim-
ilarity concerned both the run-modes utilized and
the average length of the run-modes. Our con-
clusion is therefore that the prototype, based on an
optimization formulation and a tabu search heuris-
tic, is a viable tool for the production scheduling
problem.
The persons involved in the shipment planning
and the production scheduling at NynaK s believe
that the tool can help them to carry out their
planning duties more e$ciently. The tool will make
co-operation easier between persons responsible
for di!erent planning tasks, and it will certainly
encourage the integration between shipment plann-
ing and the production scheduling. Since the tool
will save time for the planners, it will give them
the opportunity to test and analyze alternative
shipment plans and production schedules.
In some situations it may be impossible to meet
the established shipment plan (the demand) in
terms of production, and the shipment plan need to
be changed. The use of the model [SCH] will indi-
cate, not only whether a feasible solution can be
obtained for a given shipment plan or not, but also
the particular shipment that is di$cult to satisfy. In
the latter case, a set of arti"cial products of high
cost has to be added to the model, and the use of
these products will indicate appropriate changes in
the shipment plan. The output from this model may
also indicate if it is economical to buy a certain
product (component) in order to carry out the
planned shipments. Further, the suggested schedul-
ing model may be utilized to "nd out whether or
not the re"nery can make an extra shipment due to,
for example, a late inquiry by a customer, and to
estimate what extra costs such a shipment will
incur.
The shipment plan may be modi"ed in order to
reduce the production scheduling costs. The proto-
type, including the graphical interface for presenta-
tion and manipulation of schedules, can be used for
this purpose. Given a schedule for Scenario 1, the
planners at NynaK s were able to manually move
some shipments from one period to another, and
thereby to reduce the number of start-ups from 9 to
7. Using model [SCH] for this modi"ed shipment
plan, an even better schedule was obtained with
only 6 start-ups, and with a total cost that was
reduced by 10% compared to the total cost of the
optimal schedule for the original demand pattern.
This example shows how the prototype can be used
interactively with the planners to obtain good
schedules.
The model [SCH] can be used to perform a num-
ber a strategic analyses. Here, we will give two
examples. The "rst type concerns the sensitivity of
the obtained schedules with respect to changes in
the costs. Since the cost coe$cients approximate the
true costs, this type of analysis is of great interest. In
the model [SCH], the objective function re#ects the
trade-o! between the number of time periods
a run-mode is used and the inventory levels
obtained. The optimal schedule for a particular
scenario is given by the relative sizes of the costs for
start-ups and the costs for keeping inventories. It is
of interest to analyze which cost component that
in#uences the solution the most. For Scenario 1,
the start-up costs were the dominating cost in the
optimal schedule. The schedule did not signi"-
cantly change when the start-up costs were de-
creased to 50% of its original values, or increased
up to two times the original costs. Corresponding
results were obtained also for Scenario's 2 and 3. By
analyzing the characteristics of the obtained sched-
ule for di!erent relations (ratio) between the cost
components, we can obtain indications on the
economical average length of a run-mode. For the
studied scenarios, the average number of time peri-
ods a run-mode was used was in the range "ve to
eight.
The second example of strategic analysis con-
cerns changes in the storage capacities. The capaci-
ties of the tanks are assumed to be "xed and given
as input to the model [SCH]. In a longer time
perspective it is possible to invest in new capacity,
and tanks can also be taken out of operation with
an associated reduction in cost. The model can be
used to evaluate the production cost for di!erent
levels of the storage capacities, and hence, to give
an indication of what is an appropriate storage
capacity level.
We have made a small analysis of the e!ect of
changing the aggregated inventory capacity level
 M. Go( the-Lundgren et al. / Int. J. Production Economics 78 (2002) 255}270
Table 2
Analysis of changes in storage capacities in Scenario 1
Storage capacity Obj. value Inv. costs No. start-ups
(%) (%) (%)
!20 6.5 1.1 11
!10 0.2 0.3 9 including variable yield levels, and we allowed a re-
Original 0.0 0.0 9 duction of the production yield down to 50% of its
#10 !2.6 0.3 8
#20 !3.0 !0.2 8
for Scenario 1. The purpose is to illustrate how such
an analysis can be performed. The inventory capac-
ities of all products/components were reduced
(increased) by the same percentage. However, the
storage capacity for a certain product was never
reduced below the initial inventory level. In Table 2
we show the corresponding relative changes in the
objective function value and in the total inventory
cost, as well as the number of start-ups in the
optimal schedule.
The results shown in Table 2 indicate, as ex-
pected, that an increased level of storage capacity
leads to fewer start-ups and vice versa. Further, the
total cost decreases when the storage capacity is
increased. The relation between the extra or the
reduced inventory capacity and the total cost can
be used to evaluate the cost or bene"t of making
investments or reductions in the storage capacity.
At the moment, this type of analysis is very interest-
ing for the NynaK s re"nery, since a reduction in tank
capacities is considered.
Finally, we present a number of computational
tests on some of the extended models formulated in
Section 5. The "rst model concerns variable length
of the run-modes, and this model is an extension of
the basic model [SCH] where the change of run-
modes is allowed to take place at any point in time.
For Scenario 1, a reduction of the total cost of up to
3% was obtained using this extension. The reduc-
tion in cost resulted from a reduction in the inven-
tory holding cost, whereas the number of start-ups
remained the same. For other scenarios, some
changeovers may be eliminated, leading to
a greater reduction in cost. However, in such a case
the scheduler might be able to spot this potential
reduction of start-ups by interacting with the op-
timization model, without explicitly including the
269
possibility of variable length of run-modes in the
model. At the time being, we believe that the basic
model enforcing changeovers to occur only at the
beginning of time periods is adequate for support-
ing the scheduling decisions.
Next, we tested the extension of model [SCH]
maximal yield. This way of modeling represents an
alternative to de"ning additional run-modes for
di!erent yield levels. Both Scenario's 1 and 2 have
been used in these tests, and in both cases we set
r "0.5, i.e. the production may be carried out at
K
half of the given (maximal) production yield. The
optimal total cost for Scenario's 1 and 2 decreased
with 6 and 8%, respectively. The extra costs asso-
ciated with changes in the production yield are
however not included in this alternative formula-
tion. Nevertheless, our results indicate that allow-
ing for reduced production is an important issue to
consider in order to obtain cost e$cient production
schedules.
The third extension concerns robustness of sched-
ules. An important issue of the production schedul-
ing is to be able to handle uncertainty in the
shipment schedule; a tanker may be delayed or may
arrive earlier than planned. We have tested a model
extension requiring that products should be avail-
able one time period earlier than the actual planned
time period of delivery (R"1), and also requiring
that there should be enough storage capacity avail-
able if the delivery is delayed one time period.
Naturally, schedules obtained from this extended
model will be more costly since the #exibility with
respect to the storage capacity decreases. For Scen-
ario 1, the optimal total cost increased by 6.2%, due
to an increased number of start-ups. This increased
cost can be interpreted as the price for the #exibility
to ship the products earlier or later than planned.
7. Conclusions and future research
We have studied the production planning and
scheduling at a re"nery. An optimization model for
the production scheduling was formulated, and it
was illustrated how this model, as well as some
extensions of the model, can support decision
270 M. Go( the-Lundgren et al. / Int. J. Production Economics 78 (2002) 255}270
making at both strategic/tactical and operational
planning levels. A prototype scheduling tool has
been developed based on a tabu search heuristic to
solve the model, and the schedules obtained have
been analyzed by experienced planners to properly
re#ect the actual planning situation.
There are several directions for future research.
One main direction is to develop and extend the
scheduling model [SCH] to better describe the
planning situation at NynaK s. The shipment plann-
ing should be analyzed more carefully, with the
purpose to integrate this planning with the produc-
tion scheduling, ultimately in one common model.
The potential for connecting the scheduling model
to the utilization of tanks and pipes, and to the
blending of products, should also be investigated.
Further, there is a challenge to adopt the optimiza-
tion model to deal with the uncertainties associated
with the production planning and scheduling. The
solution procedures also have to be improved in
order to reduce the computational times.
In order for a scheduling tool to really serve its
purpose at the re"nery, further support of the input
data handling needs to be developed. For example,
the data needed for describing the scheduling scenario
should be possible to retrieve directly from databases
or other sources without manual intervention.
Acknowledgements
This research was performed within the Interna-
tional Graduate School of Management and Indus-
trial Engineering (IMIE) with support from the
Swedish Foundation for Strategic Research, the
Swedish National Board for Industrial and Tech-
nical Development (NUTEK), and the Center for
Industrial Information Technology (CENIIT) at
LinkoK ping University.
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