Dynamic demand lot-sizing rules for incremental quantity discounts

J Hu and C L Munson ()
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J Hu: Washington State University
C L Munson: Washington State University

Journal of the Operational Research Society, 2002, vol. 53, issue 8, 855-863

Abstract: Abstract Numerous studies have developed and compared lot-sizing procedures for finite-horizon dynamic demand, material requirements planning (MRP), environments when either no purchase discounts exist or for the case of all-units quantity discounts. This paper examines lot-sizing rules when product price schedules follow incremental quantity discounts. The optimal (non-discount) procedure and some traditional heuristic procedures are modified to incorporate incremental quantity discounts. We further modify two heuristics with a ‘look-ahead enhancement’ that performs very well under experimentation. Numerical tests revealed the overall best-performing heuristic in this study to be a modified ‘least-unit cost’ method with a look-ahead enhancement. That procedure produced an average cost penalty vs optimal of 0.26%.

Keywords: inventory; quantity discounts; purchasing; material requirements planning; heuristics (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (6)

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DOI: 10.1057/palgrave.jors.2601373

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