Economic Ordering Frequency for two Items Jointly Replenished

Abstract

The decision model to be presented is typically applicable to the batch processing industry where a batch of product is blended and subsequently packaged into various types of containers. When a product is packaged into more than one type container immediately after its manufacture, these items are said to be jointly replenished. In the case of joint replenishment, the economic lot size for each item cannot be determined without considering the rest of the items within the group. This is so because each time a batch of a product is made, there is a primary set-up cost for the manufacture of the product and a secondary set-up cost for each of the items to be packaged within the jointly replenished group. If the packaging set-up costs are very high, it may be more economical to package certain “slow moving” items less often than the “fast moving items.” Specifically, one could package a “slow moving” item once every other time or every third time a batch of product is made. An analytical model has been developed to provide a set of criteria which one can use as a basis for applying “skipping rules” to the slow moving item within a jointly replenished group.