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A Dynamic Lot-Size Model with Make-or-Buy Decisions

Author

Listed:
  • Sang-Bum Lee

    (Department of Management, Seoul City University, Seoul 131-743, Korea)

  • Paul H. Zipkin

    (Graduate School of Business, Columbia University, New York, New York 10027)

Abstract

This paper considers a dynamic lot-size model with make-or-buy decisions. In each period, the production level may not exceed a given capacity, but the purchase is unrestricted. The costs for production, purchase and inventory are concave. The problem is to find a minimum-cost production and purchase schedule that satisfies known demands over T periods. After characterizing the form of an optimal solution, we present an O(T 5 ) algorithm when the production capacities are stationary. The algorithm is extended to the case where the capacities are integer multiples of a constant. The results are further extended to the cases of backlogging, bounded inventory, and capacitated purchase.

Suggested Citation

  • Sang-Bum Lee & Paul H. Zipkin, 1989. "A Dynamic Lot-Size Model with Make-or-Buy Decisions," Management Science, INFORMS, vol. 35(4), pages 447-458, April.
    • Handle: RePEc:inm:ormnsc:v:35:y:1989:i:4:p:447-458
    DOI: 10.1287/mnsc.35.4.447
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    Cited by:

    1. Ou, Jinwen, 2017. "Improved exact algorithms to economic lot-sizing with piecewise linear production costs," European Journal of Operational Research, Elsevier, vol. 256(3), pages 777-784.
    2. Chung-Lun Li & Qingying Li, 2016. "Polynomial-Time Solvability of Dynamic Lot Size Problems," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 33(03), pages 1-20, June.
    3. Drexl, Andreas & Haase, Knut, 1992. "A new type of model for multi-item capacitated dynamic lotsizing and scheduling," Manuskripte aus den Instituten für Betriebswirtschaftslehre der Universität Kiel 286, Christian-Albrechts-Universität zu Kiel, Institut für Betriebswirtschaftslehre.
    4. Ou, Jinwen & Feng, Jiejian, 2019. "Production lot-sizing with dynamic capacity adjustment," European Journal of Operational Research, Elsevier, vol. 272(1), pages 261-269.

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