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

The economic lot and delivery scheduling problem is to simultaneously determine the production sequence of several assembly components at a supplier and 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 that minimize the holding, setup, and transportation cost for the supply chain. Previous solutions to the problem assume a constant production rate for each component and that all components are of acceptable quality. These assumptions ignore volume flexibility and quality cost. Volume flexibility permits 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 using a volume flexible production system where component quality depends on both lot sizes and unit production times. We test the performance of the algorithm and illustrate the models with numerical examples.