Determination of Economic Production Quantity for a Multi-Stage Production System with Limited Storage Capacity

Abstract

This paper describes a model for a multi-stage production system in which a uniform lot size is produced through all stages with a single setup and without interruption at each stage. Transportation of partial lots, called batches, is allowed between stages before the whole lot is completed. Although the batch size must be equal at any particular stage, the optimal number of equal-sized batches may differ across stages. Additionally, we assume that inventories between consecutive stages are constrained by a limited storage capacity. Considering setup costs, inventory holding costs, and transportation costs, an optimisation method is developed to determine the economic production quantity and the optimal batch sizes for each stage.