Optimal inventory, backlogging and machine loading in a serial, multi-stage, multi-period production environment

SUMMARY

Given the dynamic finished good requirements, a model is presented to derive the optimal levels of inventory, backlogging, and machine loading in a multi-stage, multi-period production environment characterized by non-identical machines in each stage. Dynamic capacity constraints on the level of inventory, backlogging, and machine loading are included. Furthermore, capacities and operating costs of machines performing the same tasks at any stage in the production process are permitted to vary in order to consider the individual characteristics of machines. Therefore, machine loads are obtained for non-identical machines capable of performing the same operations. The model is represented as a capacitated network with linear costs and is quickly solved using a standard network code.