Optimal Lot-Sizing/Vehicle-Dispatching Policies Under Stochastic Lead Times and Stepwise Fixed Costs

Osman Alp (), Nesim K. Erkip () and Refik Güllü ()
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Osman Alp: University of Alberta, School of Business, Finance and Management Science Department, Edmonton, Alberta, Canada T6G 2R6
Nesim K. Erkip: Middle East Technical University, Industrial Engineering Department, Ankara 06531 Turkey
Refik Güllü: Middle East Technical University, Industrial Engineering Department, Ankara 06531 Turkey

Operations Research, 2003, vol. 51, issue 1, 160-166

Abstract: We characterize optimal policies of a dynamic lot-sizing/vehicle-dispatching problem under dynamic deterministic demands and stochastic lead times. An essential feature of the problem is the structure of the ordering cost, where a fixed cost is incurred every time a batch is initiated (or a vehicle is hired) regardless of the portion of the batch (or vehicle) utilized. Moreover, for every unit of demand not satisfied on time, holding and backorder costs are incurred. Under mild assumptions we show that the demand of a period is satisfied from at most three distinct production (dispatching) epochs. We devise a dynamic programming algorithm to compute the production/dispatching quantities and times.

Keywords: Inventory/production; planning horizons: stochastic lead times and stepwise fixed costs; Transportation; scheduling; vehicles: dispatching under stochastic transit times (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (14)

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