Multi-Item Production Lot Sizing with Postponement, External Source for Common Parts, and Adjustable Rate for End Products

Abstract

This study considers a multi-item production lot-size problem incorporating postponement, an external source for common parts, and an adjustable-rate for end products. Dealing with product variety, timely requirements, and limited in-house capacity has led production managers to seek manufacturing schemes and utilization-reduction strategies that can help them meet customer needs, smoothen fabrication schedules, and lower overall manufacturing expenses. We propose a two-stage manufacturing scheme. The first stage produces common parts for multiproduct incorporating a partial supply from an outside contractor to reduce utilization/uptime. Stage two fabricates all end products using an adjustable-rate to reduce the uptime further. We build a model to characterize the problem’s features and use optimization methods to derive the optimal rotation cycle time in order to help managers make cost-effective lot-size decisions and allow manufacturers to gain competitive advantages. A numerical illustration validates the model’s capability and applicability. This study makes two important contributions: (1) It offers a decision-support model for studying such a particular batch-size problem and deciding the optimal rotation cycle time, and (2) it identifies the individual/collective influence of dual uptime-reduction strategies on the operating policy and various performance indexes to help facilitate managerial decision-making.