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Chinese Journal of Management Science ›› 2023, Vol. 31 ›› Issue (8): 226-238.doi: 10.16381/j.cnki.issn1003-207x.2021.0044

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Forecast Horizon of Dynamic Lot Sizing Model Under Production Changeovers and Two-Way Demand Substitution

Fu-ying JING1,Yin-ping Mu2(),Xiang-rui CHAO3   

  1. 1.National Research Base of Intelligent Manufacturing Service,Chongqing Technology and Business University,Chongqing 400067,China
    2.School of Management and Economics,University of Electronic Science and Technology of China,Chengdu 611731,China
    3.Business School,Sichuan University,Chengdu 610065,China
  • Received:2021-01-06 Revised:2021-09-08 Online:2023-08-15 Published:2023-08-24
  • Contact: Yin-ping Mu E-mail:ypmu@uestc.edu.cn

Abstract:

Demand (or product) substitution allows a customer who comes to purchase a specific product to accept or choose another available product when her original choice is unavailable or not offered. The notion of substitution has recently been recognized as an effective tool to improve the efficiency of multi-product inventory systems by taking advantage of the inherent flexibility. There are a large number of settings in which costs are incurred only when the product being produced is changed. Such a cost is referred to as the changeover cost. The flexibility associated with demand substitution can be used to address inefficiencies resulting from significant changeover costs.The dynamic lot sizing problem and forecast horizon under production changeovers and two-way demand substitution are analyzed. The optimal decisions of the production for a T-period problem are computed to minimize the production changeovers cost,variable production cost, substitution cost and holding cost. Based on the structural properties of the optimal solution, a forward dynamic programming algorithm is developed to solve the problem. By the marginal cost analysis method, the sufficient condition is given to establish the monotonicity of production points for two products, then the regeneration set is established for two products and the sufficient condition is given to obtain the forecast horizon. Finally, a computational experiment is used to compare the length of forecast horizon under one-way and two-way demand substitution. The length of forecast horizon under at most one changeover and multiple changeovers in a period are also compared. The length of forecast horizon will be lengthened under two-way demand substitution, and will be shortened under multiple changeovers in a period. In addition, the length of forecast horizon increases with changeover costs, and decreases with the parameters of growth and variability and substitution costs.

Key words: forecast horizon, two-way demand substitution, production changeovers, dynamic lot sizing

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