Title: A note on the joint economic lot size model with stochastic demand and variable lead time

Authors: Reza Hosseini Rad; Jafar Razmi; Mohamad Sadegh Sangari; Zahra Fallah Ebrahimi

Addresses: School of Industrial Engineering, College of Engineering, University of Tehran, P.O. Box 11155-45632, Tehran, Iran ' School of Industrial Engineering, College of Engineering, University of Tehran, P.O. Box 11155-45632, Tehran, Iran ' Faculty of Fouman, College of Engineering, University of Tehran, P.O. Box 43515-1155, Fouman 43516-66456, Iran ' Graduate School of Management, Multimedia University Malaysia (MMU), Cyberjaya 63100, Malaysia

Abstract: This paper considers the problem of choosing optimal production policy in an integrated production-inventory system comprising a single manufacturer and a single buyer. Two production scenarios are compared, namely continuous and lot-for-lot production policies, using a mathematical modelling approach and the expected total joint cost is considered as the performance measure. In addition, the lost opportunity cost due to production downtime in the lot-for-lot policy, including the cost of unemployment of human resources and stoppage of the production line, is incorporated into the model. Numerical experiment and sensitivity analysis in terms of setup and lost opportunity costs are provided to illustrate the theory and the percentage of difference in the expected total cost of the two policies is analysed. The presented approach helps managers to make the right decisions on the optimal production policy under different conditions, especially where expert and technical human resources and/or expensive production equipments are utilised.

Keywords: joint economic lot size; JELS model; single-vendor single-buyer; SVSB; continuous production policy; lot-for-lot production policy; integrated systems; lost opportunity cost; production-inventory systems; mathematical modelling; production downtime; human resources; production line stoppages.

DOI: 10.1504/IJLSM.2016.073298

International Journal of Logistics Systems and Management, 2016 Vol.23 No.1, pp.76 - 97

Received: 28 Apr 2014
Accepted: 20 Sep 2014
Published online: 30 Nov 2015 *

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