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- Title
Lot sizing with randomly graded yields.
- Authors
Nahmias, Steven; Moinzadeh, Kamran
- Abstract
We consider a single inventory item that is graded into one of two quality levels after production. The proportion of grade one units produced in a lot is a random variable assumed to follow the lognormal distribution. Demands for grade 2 may be filled with grade 1 product, but not vice versa. Assuming that demands for the two grades are known and constant, we develop a continuous review model in which cycles are defined as times when total inventory equals zero. Since grade 1 inventory may be depleted before total stock and shortages are not permitted, cycles may consist of multiple set-ups. We show that the optimal order-to-point, S, has a form similar to the EOQ. Tables of the CDF of an appropriately defined unit normal multivariate distribution are incorporated into a spreadsheet to facilitate calculations for any parameter setting.
- Subjects
PRODUCTION (Economic theory); PRODUCTION scheduling; ECONOMIC lot size; OPERATIONS research; STOCKS (Finance); INVENTORIES; MULTIVARIATE analysis
- Publication
Operations Research, 1997, Vol 45, Issue 6, p974
- ISSN
0030-364X
- Publication type
Article
- DOI
10.1287/opre.45.6.974