The dynamic lot-sizing problem with variable unit costs

Abstract

Almost all the research on the dynamic lot-sizing problem assumes that the unit cost is a constant. In many practical situations, the unit cost varies significantly during the planning horizon, and hence it should be treated as a variable. This is especially true when the technology for producing the item greatly improves, resulting in a price reduction, or inflation spirals and results in a price increase. In this paper, we consider such a situation and propose algorithms for solving the problem. The effectiveness of the proposed heuristics is empirically evaluated. The results indicate that these heuristics perform much better than their original counterparts.