NP-hard and polynomial cases for the single-item lot sizing problem with batch ordering under capacity reservation contract

Abstract

In this paper, we study the single-item lot sizing problem under a capacity reservation contract. A manufacturer is replenished by an external supplier with batch deliveries and a certain capacity is reserved at the supplier level with an advantageous cost. In addition to the classical ordering and inventory holding costs, for each batch ordered under the reserved capacity a fixed cost per batch is incurred; and for batches exceeding this capacity a higher fixed cost per batch is paid, typically through the purchase from the spot market. We identify various NP-hard cases, propose a pseudo-polynomial time dynamic programming algorithm under arbitrary parameters, show that the problem admits an FPTAS and give polynomial time algorithms for special cases. We finally state a list of open problems for further research.