Advanced search
1 file | 350.03 KB

Sensitivity of multi-product two-stage economic lotsizing models and their dependency on change-over and product cost ratio's

Author
Organization
Abstract
This study considers the production and inventory management problem of a two-stage semi-process production system. In case both production stages are physically connected it is obvious that materials are forced to flow. The economic lotsize depends on the holding cost of the end-product and the combined change-over cost of both production stages. On the other hand this 'flow shop' is forced to produce at the speed of the slowest stage. The benefit of this approach is the low amount of Work In Process inventory. When on the other hand, the involved stages are physically disconnected, a stock of intermediates acts as a decoupling point. Typically for the semi-process industry are high change-over costs for the process oriented first stage, which results in large lotsize differences for the different production stages. Using the stock of intermediates as a decoupling point avoids the complexity of synchronising operations but is an additional reason to augment the intermediate stock position. The disadvantage of this model is the high amount of Work-In-Process inventory. This paper proposes the 'synchronised planning model' realising a global optimum instead of the combination of two locally optimised settings. The mathematical model proves (for a two-stage single-product setting) that the optimal two-stage production frequency corresponds with the single EOQ solution for the first stage. A sensitivity study reveals, within these two-stage lotsizing models, the economical cost dependency on product and change-over cost ratio‟s. The purpose of this paper is to understand under which conditions the „joined setup‟ or the „two-stage individual eoq model‟ remain close to the optimal model. Numerical examples prove that the conclusions about the optimal settings remain valid when extending the model to a two-stage multi-product setting. The research reveals that two-stage individually optimized EOQ lotsizing should only be used when the end-product stage has a high added value and small change-over costs, compared to the first stage. Physically connected operations should be used when the end-product stage has a small added value and low change-over costs, or high added value and large change-over costs compared to the first production stage. The paper concludes with suggesting a practical common cycle approach to tackle a two-stage multi-product production and inventory management problem. The common cycle approach brings the benefit of a repetitive and predictable production schedule.
Keywords
Economical Lotsizing, Cyclical Production Scheduling, Two-stage production system, Economic Lot Scheduling Problem (ELSP)

Downloads

  • Sensitivity of multi-product ISIR2010 FVDB.pdf
    • full text
    • |
    • open access
    • |
    • PDF
    • |
    • 350.03 KB

Citation

Please use this url to cite or link to this publication:

Chicago
Van den broecke, Frank, El-Houssaine Aghezzaf, and Hendrik Van Landeghem. 2010. “Sensitivity of Multi-product Two-stage Economic Lotsizing Models and Their Dependency on Change-over and Product Cost Ratio’s.” In Inventories, 16th International Symposium, Proceedings. International Society for Inventory Research (ISIR 2010).
APA
Van den broecke, F., Aghezzaf, E.-H., & Van Landeghem, H. (2010). Sensitivity of multi-product two-stage economic lotsizing models and their dependency on change-over and product cost ratio’s. Inventories, 16th International symposium, Proceedings. Presented at the 16th International symposium on Inventories, International Society for Inventory Research (ISIR 2010).
Vancouver
1.
Van den broecke F, Aghezzaf E-H, Van Landeghem H. Sensitivity of multi-product two-stage economic lotsizing models and their dependency on change-over and product cost ratio’s. Inventories, 16th International symposium, Proceedings. International Society for Inventory Research (ISIR 2010); 2010.
MLA
Van den broecke, Frank, El-Houssaine Aghezzaf, and Hendrik Van Landeghem. “Sensitivity of Multi-product Two-stage Economic Lotsizing Models and Their Dependency on Change-over and Product Cost Ratio’s.” Inventories, 16th International Symposium, Proceedings. International Society for Inventory Research (ISIR 2010), 2010. Print.
@inproceedings{1110998,
  abstract     = {This study considers the production and inventory management problem of a two-stage semi-process production system. In case both production stages are physically connected it is obvious that materials are forced to flow. The economic lotsize depends on the holding cost of the end-product and the combined change-over cost of both production stages. On the other hand this 'flow shop' is forced to produce at the speed of the slowest stage. The benefit of this approach is the low amount of Work In Process inventory. When on the other hand, the involved stages are physically disconnected, a stock of intermediates acts as a decoupling point. Typically for the semi-process industry are high change-over costs for the process oriented first stage, which results in large lotsize differences for the different production stages. Using the stock of intermediates as a decoupling point avoids the complexity of synchronising operations but is an additional reason to augment the intermediate stock position. The disadvantage of this model is the high amount of Work-In-Process inventory.
This paper proposes the 'synchronised planning model' realising a global optimum instead of the combination of two locally optimised settings. The mathematical model proves (for a two-stage single-product setting) that the optimal two-stage production frequency corresponds with the single EOQ solution for the first stage. A sensitivity study reveals, within these two-stage lotsizing models, the economical cost dependency on product and change-over cost ratio\unmatched{201f}s. The purpose of this paper is to understand under which conditions the {\quotedblbase}joined setup\unmatched{201f} or the {\quotedblbase}two-stage individual eoq model\unmatched{201f} remain close to the optimal model. Numerical examples prove that the conclusions about the optimal settings remain valid when extending the model to a two-stage multi-product setting. The research reveals that two-stage individually optimized EOQ lotsizing should only be used when the end-product stage has a high added value and small change-over costs, compared to the first stage. Physically connected operations should be used when the end-product stage has a small added value and low change-over costs, or high added value and large change-over costs compared to the first production stage.
The paper concludes with suggesting a practical common cycle approach to tackle a two-stage multi-product production and inventory management problem. The common cycle approach brings the benefit of a repetitive and predictable production schedule.},
  author       = {Van den broecke, Frank and Aghezzaf, El-Houssaine and Van Landeghem, Hendrik},
  booktitle    = {Inventories, 16th International symposium, Proceedings},
  keyword      = {Economical Lotsizing,Cyclical Production Scheduling,Two-stage production system,Economic Lot Scheduling Problem (ELSP)},
  language     = {eng},
  location     = {Budapest, Hungary},
  pages        = {15},
  publisher    = {International Society for Inventory Research (ISIR 2010)},
  title        = {Sensitivity of multi-product two-stage economic lotsizing models and their dependency on change-over and product cost ratio's},
  year         = {2010},
}