A production model for a flexible production system and products with short selling season

Moutaz Khouja,Abraham Mehrez

doi:10.1155/jamds.2005.213

Abstract

We address a practical problem faced by many firms. The problem is deciding on the production levels for a product that has a very short selling season. The firm has a full period to produce and meet a lumpy demand which occurs at the end of the period. The product is no longer demanded after the end of the period. A constant production rate which minimizes average unit cost may increase holding costs. Varying the production rate at discrete points in time may increase production costs but may also decrease holding costs. In addition, allowing changes in the production rate enables the incorporation of forecast revisions into the production plan. Therefore, the best production plan depends on the flexibility of the production system and on the holding cost. In this paper, we formulate and solve a model of this production planning problem. Two models are developed to deal with two types of the average unit cost function. Numerical examples are used to illustrate the results of the model.

Highlights

Consider the problem faced by a firm which produces a product for a full period to meet a demand which is concentrated at the end of that period
The problem for the suppliers is deciding on the production levels of products
The best production plan depends on the flexibility of the production system and on the holding cost

Summary

Introduction

Consider the problem faced by a firm which produces a product for a full period to meet a demand which is concentrated at the end of that period. The cost of producing at different production rates depends on the volume flexibility of the production system. Bitran et al assumed the demand of items in a family follow a joint normal distribution and that each period has limited production capacity. In stage II, the production quantities of items in each family are determined using the revised demand forecast. Matsuo [9] developed and tested a heuristic procedure for solving the problem Both of the above models dealt with constant production rate and constant unit production cost.

Model I: single production rate change

Model II: forecast revisions and multiple production rates

Conclusions and suggestions for future research