The Single Item Dynamic Lot Sizing Problem with Minimum Lot Size Restriction

Summary

In practise, production managers prefer to determine an optimal production plan by using minimum lot size restrictions instead of setup cost [3, 5]. Anderson and Cheah [1] also noticed, that in “lot sizing practice out-of-pocket setup cost are commonly accounted for by specifying a minimum batch size parameter”. Therefore, the objective is to minimize the total inventory cost only with respect to the lot size restrictions, and not the sum of setup cost and inventory cost, as in mainstream models. In the paper we formulate the single item dynamic lot sizing problem with minimum lot size restriction and elaborate a dynamic programming algorithm for its solution. The preliminary computational results show that the algorithm is highly efficient and determines optimal solutions in negligible time.