A model for integrated procurement-production systems

In this paper, a multistage, single-product serial batch-production system is considered in which the demand is deterministic and cost factors, viz. inventory carrying, ordering, set-up, etc., are known. The objective is to minimize the total variable cost. A model is suggested which combines the purchasing policy of the raw materials and the production policy of the finished product. An experimental procedure is carried out to compare the model against a benchmark providing a lower bound for the total variable costs. The model is also compared with an instantaneous production-rate case. The results suggest that the model offers an interesting scope for heuristic procedures. The possible application domain of the model is also discussed.