Study of a real-life joint raw material delivery and lot sizing problem

Abstract

When firms dealing with their inventory control problems, consider jointly the two models: Economic Order Quantity model and Economic Production Quantity model, they can considerably reduce the total cost of the supply chain system. In this research, we confirm this statement by solving an integrated inventory control model through intra-firm planning by integrating manufacturer's raw material procurement and its production. The aim is to help, at a tactical level, firms having multiple types of products to manufacturer, multiple types of raw materials, multiple competing suppliers, non linear raw material purchasing costs, non linear raw materials transportation costs, to determine the amounts of raw materials to buy, and the amounts of finished products to manufacture. These amounts have to satisfy customers' demands without backlog and to minimize the total cost of the inventory system. The demand is deterministic and can vary from a period to another. The joint raw material delivery and lot sizing problem is formulated as a mixed integer linear program and applied to a real-life case, plastic items manufacturer. To solve the problem, we make use of a commercial solver (CPLEX). The results obtained indicate that we manage to decrease the total cost considered.