Joint economic production-sihpment policy in a single-manufacturer-multiple-item system

Abstract

This paper proposes an analytical model determining a joint production-shipment policy in a supply chain with a single manufacturer and multiple retailers. The manufacturer produces multiple items in a single facility under a common rotation cycle policy to prevent shortages at any retailer. We formulate the problem as a variant of a classical economic lot scheduling problem, provide a solution procedure determining an optimal common cycle length, shipment frequencies and quantities, and show its global optimality. In case that the optimal shipment frequencies are not integers, we introduce an efficient integerization procedure and show that the integer-valued solution is as good as the real-valued optimal solution through a numerical test. Significance: An extended version of classical economic lot-scheduling problem herein can be utilized to synchronize production and shipments in a supply chain consisting of a single manufacturer and multiple retailers.