Optimal lot-sizing/vehicle-dispatching policies under stochastic lead times and stepwise fixed costs

Optimal lot-sizing/vehicle-dispatching policies under stochastic lead times and stepwise fixed costs

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Article ID: iaor20033162
Country: United States
Volume: 51
Issue: 1
Start Page Number: 160
End Page Number: 166
Publication Date: Jan 2003
Journal: Operations Research
Authors: , ,
Keywords: inventory
Abstract:

We characterize optimal policies of a dynamic lot-sizing/vehicle-dispatching problem under dynamic deterministic demands and stochastic lead times. An essential feature of the problem is the structure of the ordering cost, where a fixed cost is incurred every time a batch is initiated (or a vehicle is hired) regardless of the portion of the batch (or vehicle) utilized. Moreover, for every unit of demand not satisfied on time, holding and backorder costs are incurred. Under mild assumptions we show that the demand of a period is satisfied from at most three distinct production (dispatching) epochs. We devise a dynamic programming algorithm to compute the production/dispatching quantities and times.

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