Solving a finite horizon EPQ problem with backorders

Abstract

This paper presents an alternative approach to solve a finite horizon production lot sizing model with backorders using Cauchy-Bunyakovsky-Schwarz Inequality. The optimal batch size is derived from a sequence number of batches. We prove that a constant batch size policy with one fill rate is better than the variable batch sizes with variable fill rates. Finally, a practical approach is proposed to find the optimal solutions for a discrete planning horizon and discrete batch sizes.