A decision-making model for optimal production rate in economic volume-flexibility production system

Abstract

The classical economic production lot size (EPL) model assumes a predetermined and inflexible production rate and a continuous demand of customers, and does not take raw materials inventory cost into account. In this paper, a production system with volume flexibility is considered which procures raw materials from suppliers and processes them to convert to finished products. We develop a decision-making model for optimal production rate selection in a volume-flexible production system, where finished products are delivered periodically at a fixed quantity with a fixed interval of time. In this model, production rate is perceived as a decision variable and unit production cost becomes a function of production rate. We develop a pragmatic computation approach to solve the proposed model for special unit production cost functions. Some observations are made for optimal production rate analysis. Finally, we conduct a numerical study to illustrate the solution. Also, a set of data with ten problems is tested and compared.

Keywords:

• Volume flexibility
• economic manufacturing quantity
• production-delivery system
• raw material ordering policy