A solution procedure for Economic Lot Scheduling Problems even in high utilisation facilities

Economic lot scheduling problem (ELSP) handles the problem of deciding what order quantities to use when different products/items are produced in the same capacity constrained production facility. It has previously been shown, and it is shown in this article, that it is possible to find a feasible solution fulfilling true feasibility conditions. However, if the utilisation of the production facility is high the production often has to start before the inventory reaches zero to avoid future shortages. Such ‘early starts’ creates an extra inventory holding cost that the traditional approximation for the inventory holding cost does not account for. This article presents an iterative solution procedure that computes the true inventory holding cost and minimises the total costs. Contrary to previous solution procedures, this procedure requires that the production is scheduled in detail. The heuristic solution procedure is illustrated by a numerical example, it is programmed in MATLAB and variants of the problem are presented.