Lot-Sizing Two-Echelon Assembly Systems with Random Yields and Rigid Demand

European Journal of Operational Research, Vol. 173, No. 2, pp. 600-616, 2006

17 Pages Posted: 23 Sep 2012

See all articles by Abraham Grosfeld-Nir

Abraham Grosfeld-Nir

Academic College of Tel-Aviv Yafo

Shoshana Anily

Tel Aviv University - Faculty of Management

Tal Ben-Zvi

Stevens Institute of Technology

Date Written: 2006

Abstract

We consider a two-echelon assembly system producing a single final product for which the demand is known. The first echelon consists of several parallel stages, whereas the second echelon consists of a single assembly stage. We assume that the yield at each stage is random and that demand needs to be satisfied in its entirety; thus, several production runs may be required. A production policy should specify, for each possible configuration of intermediate inventories, on which stage to produce next and the lot size to be processed. The objective is to minimize the expected total of setup and variable production costs.

We prove that the expected cost of any production policy can be calculated by solving a finite set of linear equations whose solution is unique. The result is general in that it applies to any yield distribution. We also develop efficient algorithms leading to heuristic solutions with high precision and, as an example, provide numerical results for binomial yields.

Keywords: Multiple lot sizing, Random yield, Rigid demand, Assembly system

JEL Classification: C44

Suggested Citation

Grosfeld-Nir, Abraham and Anily, Shoshana and Ben-Zvi, Tal, Lot-Sizing Two-Echelon Assembly Systems with Random Yields and Rigid Demand (2006). European Journal of Operational Research, Vol. 173, No. 2, pp. 600-616, 2006, Available at SSRN: https://ssrn.com/abstract=2150317

Abraham Grosfeld-Nir

Academic College of Tel-Aviv Yafo ( email )

29 Melchet
Tel-Aviv, 61560
Israel

Shoshana Anily

Tel Aviv University - Faculty of Management ( email )

P.O. Box 39010
Ramat Aviv, Tel Aviv, 69978
Israel

Tal Ben-Zvi (Contact Author)

Stevens Institute of Technology ( email )

Hoboken, NJ 07030
United States

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