Abstract
The classical formula (5) for optimal lot sizing is a useful tool especially for those manufacturing processes in which labor-intensive items are produced in small quantities, and which require a frequent change of product. An example is the manufacture of special purpose instruments. The simplicity of the formula is essentially a result of assuming production cost to be a linear function of the quantity produced, and of assuming stationarity of demand. More complex models which consider nonlinear costs [5], [19], or which incorporate dynamic demand [16], or which include capacity constraints [4] require nonlinear and dynamic programming techniques as well as the measurement and estimation of additional parameters; they can therefore be put to use only in cases of mass production.
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Muth, E.J., Spremann, K. (1978). A Class of Stationary EOQ Problems and Learning Effects. In: Henn, R., Korte, B., Oettli, W. (eds) Optimization and Operations Research. Lecture Notes in Economics and Mathematical Systems, vol 157. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-95322-4_22
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DOI: https://doi.org/10.1007/978-3-642-95322-4_22
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