Affordable Access

Publisher Website

Multiple lot-sizing, and value of probabilistic information, in production to order of an uncertain size

Authors
Journal
International Journal of Production Economics
0925-5273
Publisher
Elsevier
Publication Date
Identifiers
DOI: 10.1016/s0925-5273(96)00096-5
Keywords
  • Lot-Sizing
  • Random Yield
  • Uncertain Demand
  • Production To Order
Disciplines
  • Communication

Abstract

Abstract A make-to-order batch manufacturer knows that an order for items with some particular specifications is forthcoming, but does not yet know the exact size of the order. Due to production lead times, work needs to start immediately. But some units produced may fail to meet required tolerances; that is, the yield of each batch is random. Each new run involves a costly setup, and each unit attempted involves material and other variable costs. If a subjective probability distribution for the order size can be formed, the following related questions arise: 1. (a) What is the optimal run size? 2. (b) When should production stop? To answer these questions, this paper formulates a new model, whose main new feature is the ability to handle uncertain demand within a multiple lot-sizing setting. It is proved that the optimal policy for this scenario is one of control limit — stop if and only if the stock of good units is larger than some critical value. A computer program was developed for solving the problem for binomial yields, and optimal policies for several examples are reported. Due to the effort required to form and communicate probabilistic forecasts, a common practice is to express a forecast as a single number, corresponding, perhaps, to the mean or median of the unarticulated distribution. We compute the extra profit expected from forming, and using, probabilistic forecasts. We also show how to compute the profit's variance for any policy.

There are no comments yet on this publication. Be the first to share your thoughts.

Statistics

Seen <100 times
0 Comments

More articles like this

Augmenting the lot sizing order quantity when dema...

on European Journal of Operationa... Jan 01, 2008

Concurrent pricing and lot sizing for make-to-orde...

on International Journal of Produ... Jan 01, 2005

Optimal lot sizing for an unreliable production sy...

on International Journal of Produ... Jan 01, 2004

Multiple lot-sizing decisions with an interrupted...

on Computers & Industrial Enginee... Jan 01, 2009
More articles like this..