Research Reports from the Department of Operations
Document Type
Dissertation
Publication Date
7-1-1975
Abstract
The research presented here is oriented toward a company organized as a multi-level, production-inventory system, which can be represented by an acyclic network structure. In our model, we consider dependent stochastic demand and incorporate the concept of service level along with the associated costs of carrying safety stocks at different levels of the manufacturing chain. We develop and test an algorithm that specifically derives the dependent demand distributions and then computes optimal order quantities based on a trade-off between setup, holding, and safety stock costs at all levels. The algorithm, which is iterative in nature, can be easily incorporated into a computer-based MRP system, and converges rapidly with very favorable results. The algorithm was used to generate ordering policies for 206 manufactured and purchased parts, based on data obtained from a company located in the Midwest and manufacturing heating and air conditioning systems. A 7% reduction in inventory-related costs (as compared to the company's existing lot-to-lot ordering policy) was achieved through the use of the algorithm. The algorithm also performed very favorably compared to the independent EOQ method. Trade-off curves between service-level policies and inventory-related costs are also developed for these products.
Keywords
Operations research, Inventory control, Stochastic processes, Production management, Manufacturing processes--Data processing, Algorithms, Material requirements planning, Air conditioning industry
Publication Title
Dissertation/Technical Memorandums from the Department of Operations, School of Management, Case Western Reserve University
Issue
Technical memorandum no. 389 ; Submitted in partial fulfillment of the requirements for the Degree of Doctor of Philosophy.
Rights
This work is in the public domain and may be freely downloaded for personal or academic use
Recommended Citation
Darukhanavala, Phiroz P., "Economic Lot Size Determination in Multi-Item, Multi-Level Production-Inventory Systems with Acyclic Network Structures" (1975). Research Reports from the Department of Operations. 174.
https://commons.case.edu/wsom-ops-reports/174