The effect of lot-sizing on workload variability

This study is concerned, first of all, with analytically describing the relationship between dynamic lot-sizing models and workload variability. Secondly, in order to account for production level change costs the authors propose a simple modification to existing heuristic models. Lastly, they employ a simulation model to empirically extend these results to a typical MRP multiechelon production environment. An example is included to show clearly that with cost premiums for overtime and severance or guaranteed minimum costs for undertime the traditional lot-sizing techniques significantly underestimate actual costs and can lead to very costly policies.