Optimal lot-sizing in multi-item production inventories

Abstract

A model for multi-item production inventories with known constant demand and finite shortage cost is developed. The model is deterministic, and includes items competing for limited storage space and capital investment. Price breaks either in the production cost or in the holding cost are further considered. A three-level computational algorithm is developed to solve the constrained optimization problem in each case. Finally, the model is tested for a simulated assembly of six different gear boxes in a machine tool company implementing group family technology in its production and storage system. The obtained results have demonstrated the potential of our approach.