A Dynamic Lot-Size Model with Make-or-Buy Decisions

Sang-Bum Lee and Paul H. Zipkin
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Sang-Bum Lee: Department of Management, Seoul City University, Seoul 131-743, Korea
Paul H. Zipkin: Graduate School of Business, Columbia University, New York, New York 10027

Management Science, 1989, vol. 35, issue 4, 447-458

Abstract: This paper considers a dynamic lot-size model with make-or-buy decisions. In each period, the production level may not exceed a given capacity, but the purchase is unrestricted. The costs for production, purchase and inventory are concave. The problem is to find a minimum-cost production and purchase schedule that satisfies known demands over T periods. After characterizing the form of an optimal solution, we present an O(T 5 ) algorithm when the production capacities are stationary. The algorithm is extended to the case where the capacities are integer multiples of a constant. The results are further extended to the cases of backlogging, bounded inventory, and capacitated purchase.

Keywords: production/inventory; lot-sizing; make-or-buy (search for similar items in EconPapers)
Date: 1989
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:35:y:1989:i:4:p:447-458

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