We consider a model for a serial supply chain in which production, inventory, and transportation decisions are integrated in the presence of production capacities and concave cost functions. The model we study generalizes the uncapacitated serial single-item multilevel economic lot-sizing model by adding stationary production capacities at the manufacturer level. We present algorithms with a running time that is polynomial in the planning horizon when all cost functions are concave. In addition, we consider different transportation and inventory holding cost structures that yield improved running times: inventory holding cost functions that are linear and transportation cost functions that are either linear, or are concave with a fixed-charge structure. In the latter case, we make the additional common and reasonable assumption that the variable transportation and inventory costs are such that holding inventories at higher levels in the supply chain is more attractive from a variable cost perspective. While the running times of the algorithms are exponential in the number of levels in the supply chain in the general concave cost case, the running times are remarkably insensitive to the number of levels for the other two cost structures

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Keywords concave functions, cost structure, costs (industrial), delivery goods, dynamic programming, economic lot size, industrial capacity, industrial productivity, integration of production planning and transportation, inventories, lot sizing, polynomial time algorithms, production (economic theory), shipment of goods, supply chains
Persistent URL dx.doi.org/10.1287/mnsc.1050.0378, hdl.handle.net/1765/11587
Series ERIM Top-Core Articles
Journal Management Science
van Hoesel, S, Romeijn, H.E, Romero Morales, D, & Wagelmans, A.P.M. (2005). Integrated Lot Sizing in Serial Supply Chains with Production Capacities. Management Science, 51(11), 1706–1719. doi:10.1287/mnsc.1050.0378