Economic Delivery Quantities For Capacitated Multi-Stage Production Systems
Maxwell, W.L.; Muckstadt, J.A.; Delporte, C.M
Procurement lot sizes for externally purchased components used in final assemblies are frequently computed using simple rules. For example, when production rate is constant, Wilson lot size formula is generally used, and when demand rates change over time, formulas such as the part period balancing method, the least unit cost approach, or the Silver-Meal heuristic are used (See reference 4). Each of these methods of computing compare inventory carrying costs to fixed ordering costs in order to minimize total component procurement costs. However, by making this the focus of computation, many issues of practical significance are ignored. Problems arise when amounts ordered for a component are delivered in several lots. To study how assembly plants generally work, the authors set up a model that operates in a ?relatively similar manner? to many assembly plants. They use this example to demonstrate how a model of this environment can be developed to produce economic delivery quantities to each storage area, recognizing capacity limitations.
order quantities; economic delivery quantity; capacity limitations