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Hongyan Li, Joern Meissner
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| Abstract |
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One of the fundamental problems in operations management is determining the
optimal investment in capacity. Capacity investment consumes resources and the
decision, once made, is often irreversible. Moreover, the available capacity level
affects the action space for production and inventory planning decisions directly.
In this paper, we address the joint capacitated lot sizing and capacity acquisition
problem. The firm can produce goods in each of the finite periods into which the
production season is partitioned. Fixed as well as variable production costs are
incurred for each production batch, along with inventory carrying costs. The production
per period is limited by a capacity restriction. The underlying capacity
must be purchased up front for the upcoming season and remains constant over
the entire season. We assume that the capacity acquisition cost is smooth and
convex. For this situation, we develop a model which combines the complexity
of time-varying demand and cost functions and of scale economies arising from
dynamic lot-sizing costs with the purchase cost of capacity. We propose a heuristic
algorithm that runs in polynomial time to determine a good capacity level and
corresponding lot sizing plan simultaneously. Numerical experiments show that
our method is a good trade-off between solution quality and running time. |
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| Keywords |
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Supply chain management, Lot sizing, Capacity, Approximation, Heuristics
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| Status |
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International Journal of Production Research Vol 49, Issue 16 (August 2011), pp 4945–4963. |
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| Download |
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www.meiss.com/download/SC-Li-Meissner.pdf
(182 kb) |
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| Reference |
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BibTeX,
Plain Text |
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