Solving the capacitated lot-sizing problem with backorder consideration

• Published in: The Journal of the Operational Research Society Vol. 52; no. 8; pp. 952 - 959
• Main Authors: Cheng, C H, Madan, M S, Gupta, Y, So, S
• Format: Journal Article
• Language: English
• Published: London Taylor & Francis 01.08.2001; Palgrave Macmillan UK
• Subjects: backorder; Business and Management; capacitated lot-sizing; Management; Operations Research/Decision Theory; single level constrained resource; Technical Note; capacitated lot-sizing; backorder; single level constrained resource
• ISSN: 0160-5682; 1476-9360
• DOI: 10.1057/palgrave.jors.2601166

In this research, we formulate and solve a type of the capacitated lot-sizing problem. We present a general model for the lot-sizing problem with backorder options, that can take into consideration various types of production capacities such as regular time, overtime and subcontracting. The objective is to determine lot sizes that will minimize the sum of setup costs, holding cost, backorder cost, regular time production costs, and overtime production costs, subject to resource constraints. Most existing formulations for the problem consider the special case of the problem where a single source of production capacity is considered. However, allowing for the use of alternate capacities such as overtime is quite common in many manufacturing settings. Hence, we provide a formulation that includes consideration of multiple sources of production capacity. We develop a heuristic based on the special structure of fixed charge transportation problem. The performance of our algorithm is evaluated by comparing the heuristic solution value to lower bound value. Extensive computational results are presented.