An efficient algorithm for the Dynamic Economic Lot Size Problem

This paper addresses the question of production/procurement planning for finite horizon, deterministic, dynamic demand process, known as the ‘Dynamic Economic Lot Size Problem’. A new algorithm is presented and compared to existing exact procedures. The algorithm first decomposes the problem into much smaller sequences (planning horizons). It then applies an exact method to schedule the production in each sequence (this stage is illustrated here with the ‘classical’ dynamic programming algorithm of Zangwill). Finally, it combines the partial solutions to an overall optimal solution. Computational results which demonstrate the effectiveness of the proposed algorithm are provided.