In this paper a two-stage optimization of piece arrangement for the cutting problem in shipbuilding is proposed. The two-stage optimization consists of a new technique, which is named as preselection and elimination technique (PSET), at the first stage and tabu search method at the second stage. Applying the new technique PSET, certain longer orders, which are chosen by a control factor, will be matched with some other shorter ones to fit the stock of shaped steel. Once these orders are selected, they will be eliminated from the whole orders. After the first stage, a tabu search approach is applied to optimize the remainder arrangement at the second stage. By using this two-stage optimization, both the solution quality and computational time are highly improved.

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