A Dynamic Lot Size Problem with Multiple Customers: Customer-Specific Shipping and Backlogging Costs
IIE Transactions, Vol. 39, No. 11, November 2007
27 Pages Posted: 9 May 2009
Abstract
This paper considers a dynamic lot sizing problem faced by a producer who supplies a single product to multiple customers. Characterized by their backorder costs as well as shipping costs, a customer with a high backorder cost has a greater need for the product than a customer with a low backorder cost. We show that the general problem with time-varying customer-dependent backlogging and shipping costs is NP-hard in the strong sense. We then develop an efficient dynamic programming algorithm for an important instance of the problem when there is no speculative motive for backlogging. We also establish forecast horizon results for the case of stationary production and shipping costs, which help the decision maker determine a proper forecast horizon in a rolling-horizon planning process.
Keywords: Dynamic lot sizing model, dynamic programming, forecast horizon, multiple customers
JEL Classification: C61, M11
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
By Suresh Chand, Vernon Hsu, ...
-
By Stanislaw Bylka and Suresh Sethi
-
Finite-Production-Rate Inventory Models with First and Second Shift Setups
By Suresh Chand and Suresh Sethi
-
Multiple Finite Production Rate Dynamic Lot Size Inventory Models
By Suresh Sethi and Suresh Chand
-
By Ryszarda Rempala and Suresh Sethi
-
Strong Decision and Forecast Horizons in a Convex Production Planning Problem
By Jinn-tsair Teng, Gerald L. Thompson, ...
-
The Dynamic Lot Size Model with Stochastic Demands: A Decision Horizon Study
By Sita Bhaskaran and Suresh Sethi
-
Implementing Supply Routing Optimization in a Make-to-Order Manufacturing Network
By John Foreman, Jérémie Gallien, ...