THE ECONOMIC LOT AND DELIVERY SCHEDULING PROBLEM - THE COMMON CYCLE CASE

We analyze the interface between a supplier and an assembly facility, where direct shipments are made from one to the other. The final manuf acturing step at the supplier involves multiple components produced on a single machine or production line. The assembly facility uses these components at a constant rate. The supplier incurs a sequence-indepen dent setup cost and/or setup time each time the production line is cha nged over from one component to another. On the other hand, setup cost s and times for the assembly facility are negligible. We consider two types of delivery cost: a fixed charge for each delivery, and a fixed- charge-per-truck cost. We develop a heuristic procedure to find a 'jus t-in-time' schedule in which one production run of each product and a subsequent delivery of these products to the assembly facility occur i n each cycle. The objective is to find the cycle duration that minimiz es the average cost per unit time of transportation, inventory at both the supplier and the assembly facility, and setup costs at the suppli er. We also develop an error bound for this procedure, and use some of the insights gained from the analysis to explain how delivery schedul es can influence the attractiveness of reductions in production setup costs.