Economic operating policy and variations in production load

Abstract

When a reorder point system is used for initiating production orders, the production load on the machines can be treated as a random variable. One way of resolving problems associated with variations in the production load is to use smaller batch quantities, but there are also other possibilities to smooth the load. In this paper we present a model for determining:

(1) the economic batch quantity

(2) the economic planning period

(3) the economic allocation of capacity during the planning period

for items produced exclusively on a group of machines. An example has been solved to illustrate the method.