An integrated material flow system approach for determining the economic production quantity

Traditionally, the analysis of material flow systems has focused on each of the individual components of the system separately (i.e. material handling, production lot size, unit load size, flow path, layout, space, etc). Even though each component is difficult to address on its own, it is imperative that they be addressed concurrently due to their interactions. This paper explores the relationships between the components in the material flow system with respect to determining the economic production quantity (EPQ). This is in contrast to the traditional EPQ model, which considers only set-up cost, inventory cost, and demand, while ignoring other material flow system issues. A multi-item economic production quantity model under a storage space limit is considered with respect to material handling equipment selection and requirements, unit load size, and flow path selection. The integrated material flow system problem is mathematically formulated as a large scale, nonlinear integer programming model, and a heuristic solution procedure is developed. The impact of using an integrated approach to determine the EPQ is illustrated and solutions are compared to both a lower bound and a traditional sequential approach. It is found that an integrated approach provides consistent and significant improvement in the overall solution quality.