THE ECONOMIC LOT AND DELIVERY SCHEDULING PROBLEM - MODELS FOR NESTED SCHEDULES

We investigate the problem of simultaneously determining schedules for the production of several assembly components at a captive supplier a nd delivery of those components to the customer. We consider situation s in which production economies of scale in the form of setup costs an d/or setup times make it desirable for the supplier to produce in batc hes that are larger than the desired order quantity of the customer. T he objective is to minimize the average cost per unit time of transpor tation, inventory at both the customer and the supplier, and, where ap plicable, setup costs. We develop a heuristic solution procedure and a lower bounding approach for this problem. We also report experimental results that indicate that the heuristic provides solutions close to the lower bound in most instances. Our results provide a means to answ er the often-asked question of whether just-in-time suppliers are (or should be) asked to hold inventory for their customers, and the questi on of how much setup costs and setup times need to be reduced so that the suppliers no longer need to hold that inventory.