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Integrated Lot Sizing in Serial Supply Chains with Production Capacities

Author

Listed:
  • Stan van Hoesel

    (Faculty of Economics and Business Administration, Maastricht University, P.O. Box 616, 6200 MD Maastricht, The Netherlands)

  • H. Edwin Romeijn

    (Department of Industrial and Systems Engineering, University of Florida, 303 Weil Hall, P.O. Box 116595, Gainesville, Florida 32611-6595)

  • Dolores Romero Morales

    (Saïd Business School, University of Oxford, Park End Street, Oxford OX1 1HP, United Kingdom)

  • Albert P. M. Wagelmans

    (Econometric Institute, Erasmus University Rotterdam, P.O. Box 1738, 3000 DR Rotterdam, The Netherlands)

Abstract

We consider a model for a serial supply chain in which production, inventory, and transportation decisions are integrated in the presence of production capacities and concave cost functions. The model we study generalizes the uncapacitated serial single-item multilevel economic lot-sizing model by adding stationary production capacities at the manufacturer level. We present algorithms with a running time that is polynomial in the planning horizon when all cost functions are concave. In addition, we consider different transportation and inventory holding cost structures that yield improved running times: inventory holding cost functions that are linear and transportation cost functions that are either linear, or are concave with a fixed-charge structure. In the latter case, we make the additional common and reasonable assumption that the variable transportation and inventory costs are such that holding inventories at higher levels in the supply chain is more attractive from a variable cost perspective. While the running times of the algorithms are exponential in the number of levels in the supply chain in the general concave cost case, the running times are remarkably insensitive to the number of levels for the other two cost structures.

Suggested Citation

  • Stan van Hoesel & H. Edwin Romeijn & Dolores Romero Morales & Albert P. M. Wagelmans, 2005. "Integrated Lot Sizing in Serial Supply Chains with Production Capacities," Management Science, INFORMS, vol. 51(11), pages 1706-1719, November.
    • Handle: RePEc:inm:ormnsc:v:51:y:2005:i:11:p:1706-1719
    DOI: 10.1287/mnsc.1050.0378
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    References listed on IDEAS

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