THE TRENDED INVENTORY LOT-SIZING PROBLEM WITH SHORTAGES UNDER A NEW REPLENISHMENT POLICY

In the past few years, considerable attention has been given to the in ventory lot sizing problem with trended demand over a fixed horizon. T he traditional replenishment policy is to avoid shortages in the last cycle. Each of the remaining cycles starts with a replenishment and in ventory is held for a certain period which is followed by a period of shortages. A new replenishment policy is to start each cycle with shor tages and after a period of shortages a replenishment should be made, In this paper, we show that this new type of replenishment policy is s uperior to the traditional one. We further propose four heuristic proc edures that follow the new replenishment policy. These are the constan t demand approximation method the equal cycle length heuristic, the ex tended Silver approach, and the extended least cost solution procedure . We also examine the cost and computation time performances of these heuristic procedures through an empirical study. The number of test pr oblems solved to optimality, average and maximum cost deviation from o ptimum were used as measures of cost performance. The results of the 1 0 000 test problems reveal that the extended least cost approach is mo st cost effective.