Dynamic lot sizing with minimum order size and lost sales

Dynamic lot sizing is the problem of determining the quantity and timing of ordering items while satisfying the demand over a finite planning horizon. This paper considers the problem with two practical considerations: minimum order size and lost sales. The minimum order size is the minimum amount o...

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Bibliographic Details
Published inJournal of international logistics and trade Vol. 8; no. 1; pp. 41 - 55
Main Authors Kim, Hwa-Joong, Yu, Eun-Kyung, Kim, Kwang-Tae, Kim, Tae-Seung
Format Journal Article
LanguageEnglish
Published Emerald Publishing 30.06.2010
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Summary:Dynamic lot sizing is the problem of determining the quantity and timing of ordering items while satisfying the demand over a finite planning horizon. This paper considers the problem with two practical considerations: minimum order size and lost sales. The minimum order size is the minimum amount of items that should be purchased and lost sales involve situations in which sales are lost because items are not on hand or when it becomes more economical to lose the sale rather than making the sale. The objective is to minimize the costs of ordering, item , inventory holding and lost sale over the planning horizon. To solve the problem, we suggest a heuristic algorithm by considering trade-offs between cost factors. Computational experiments on randomly generated test instances show that the algorithm quickly obtains near-optimal solutions.
ISSN:1738-2122
2508-7592
DOI:10.24006/jilt.2010.8.1.41