The economic lot and delivery scheduling problem: common cycle, rework, and variable production rate

The economic lot and delivery scheduling problem is to simultaneously deter mine the production sequence of several assembly components at a supplier a nd the delivery interval of those components to the customer. The customer, an assembly facility, is assumed to use the components at a constant rate. The objective is to find the production sequence and delivery interval tha t minimize the holding, setup, and transportation cost for the supply chain . Previous solutions to the problem assume a constant production rate for e ach component and that all components are of acceptable quality. These assu mptions ignore volume flexibility and quality cost. Volume flexibility perm its a system to adjust the production rate upwards or downwards within wide limits. Also, component quality may deteriorate with larger lot sizes and decreased unit production times. In this paper. we develop an algorithm for solving the economic lot and delivery scheduling problem for a supplier us ing a volume flexible production system where component quality depends on both lot sizes and unit production times. We test the performance of the al gorithm and illustrate the models with numerical examples.