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Economic lot sizing in a production system with random demand

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  • Shine-Der Lee
  • Chin-Ming Yang
  • Shu-Chuan Lan

Abstract

An extended economic production quantity model that copes with random demand is developed in this paper. A unique feature of the proposed study is the consideration of transient shortage during the production stage, which has not been explicitly analysed in existing literature. The considered costs include set-up cost for the batch production, inventory carrying cost during the production and depletion stages in one replenishment cycle, and shortage cost when demand cannot be satisfied from the shop floor immediately. Based on renewal reward process, a per-unit-time expected cost model is developed and analysed. Under some mild condition, it can be shown that the approximate cost function is convex. Computational experiments have demonstrated that the average reduction in total cost is significant when the proposed lot sizing policy is compared with those with deterministic demand.

Suggested Citation

  • Shine-Der Lee & Chin-Ming Yang & Shu-Chuan Lan, 2016. "Economic lot sizing in a production system with random demand," International Journal of Systems Science, Taylor & Francis Journals, vol. 47(5), pages 1142-1154, April.
    • Handle: RePEc:taf:tsysxx:v:47:y:2016:i:5:p:1142-1154
    DOI: 10.1080/00207721.2014.915354
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    References listed on IDEAS

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