Model for cost estimation in a finite-capacity environment

Model for cost estimation in a finite-capacity environment

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Article ID: iaor20061995
Country: United Kingdom
Volume: 44
Issue: 2
Start Page Number: 305
End Page Number: 327
Publication Date: Jan 2006
Journal: International Journal of Production Research
Authors: ,
Keywords: programming: integer, programming: branch and bound, heuristics
Abstract:

Cost estimation is a practical problem that has attracted the attention of many researchers. Past research has focused mainly on cost estimation in an unlimited capacity environment. This paper presents a mixed-integer-programming model (MIP) for estimating cost under finite capacity. It proposes an iterative heuristic model based on a marginal analysis where the total cost without the new order is subtracted from the total cost with the new order. The proposed heuristic's efficiency and effectiveness are examined with respect to the optimal solution for small instances of the problem and compared with a partial enumeration solution for larger problem instances. Lower bounds obtained from the partial Branch-and-Bound procedure are also used for comparison. A computational study is performed to test how different factors affect the advantage of using the proposed heuristic over a conventional method for cost estimation.

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